Embassy Construction: Pace Is Slower Than Projected, and State Could Make Program Improvements

In 1998, terrorists bombed two U.S. embassies in East Africa, killing over 220 people and injuring more than 4,000 others. In 1999, State launched the CSCP with the primary goal of providing secure, safe, and functional workplaces, and OBO adopted a streamlined, standard design for all new embassies. In 2011, OBO shifted to the Excellence approach for new embassies, where greater use of custom designs is intended to improve embassies' functionality, quality, operating costs, and appearance.

GAO was asked to review the performance of the CSCP. This report examines (1) the pace of the CSCP in constructing new embassies, (2) the cost and schedule performance of OBO's recent embassy construction projects, and (3) key factors that have affected State's ability to deliver construction projects efficiently. GAO analyzed information from State planning, funding, and reporting documents and interviewed State and contractor officials. As part of an assessment of nine construction case-study projects, selected for cost or schedule increases, GAO conducted four site visits to embassies under construction.

The Department of State's (State) Bureau of Overseas Buildings Operations (OBO) has constructed new embassies at a slower pace than forecast due in part to unexpected building requirements and inflation. In 1999 State identified a need to replace 180 embassies. In 2005, with about 30 projects underway, State planned to replace the other 150 embassies by 2018. Since 1999, OBO has built 77 embassies under its Capital Security Construction Program (CSCP), at a total cost of about $24 billion as of fiscal year 2017. CSCP's pace has been affected by unexpected additional building requirements, such as office annexes and Marine quarters. Also, CSCP received only one program funding adjustment for inflation since 1999, and State does not intend to seek annual adjustments. Currently, OBO does not provide information on inflationary effects on CSCP or an estimated total capital investment or feasible time frames for the nearly 50 embassies identified for replacement beyond 2022. Lack of such information may affect stakeholders' ability to make informed budget decisions.

While cost growth occurred on a majority of completed embassy projects and durations averaged about 36 months, these were generally within budgeting and planning allowances. GAO could not assess performance of Excellence projects because none had been completed as of the end of fiscal year 2017.

Staffing workload and contractor collaboration have affected OBO's project delivery. Without an OBO-wide workforce analysis, it is unclear whether OBO's staffing is commensurate with its workload needs. OBO maintains that its office overseeing project design reviews is understaffed, adversely affecting some of its critical functions. Contractors also expressed concerns about the quality of design reviews, which may be affected by a staffing shortage and the use of temporary contractors. Also, OBO and contractor officials acknowledged weaknesses in collaboration, particularly with regard to contractors less experienced with embassy construction. Of the five contractors GAO spoke with, three said they are unlikely to pursue future projects because of issues working with OBO. Formal construction partnering—an industry best practice—between OBO and its contractors could help avoid adversarial relationships that inhibit swift resolution of issues. OBO's two long-standing contractors that have completed most of the CSCP embassy projects participated in early projects OBO identified as having used formal partnering.

GAO recommends that State (1) provide information on the estimated effects of inflation on planned projects, (2) provide an analysis of estimated total costs and time frames to complete the CSCP, (3) conduct an OBO-wide workforce analysis, and (4) pilot formal construction partnering. State concurred with our recommendations and also conveyed it is now pursuing other initiatives beyond Excellence.

The U.S. Department of State (State) operates more than 275 embassies,  consulates, and other diplomatic missions worldwide. More than 86,000  U.S. government employees are housed in these facilities. On August 7,  1998, terrorists bombed the U.S. embassies in Nairobi, Kenya, and Dar  es Salaam, Tanzania, killing over 220 people and injuring more than  4,000 others. Following those attacks, the Secure Embassy Construction  and Counterterrorism Act of 1999 required State to develop and report a  list of diplomatic facilities scheduled for replacement, prioritized on the  basis of their vulnerability to terrorist attack. At that time, State  determined that embassies at more than 180 posts needed to be  replaced to meet security standards and initiated the Capital Security  Construction Program (CSCP) to construct new secure, safe, and  functional embassies, administered by State’s Bureau of Overseas  Buildings Operations (OBO). To expedite construction, OBO standardized  embassies’ designs and streamlined their construction through a design- build project delivery method, which combined design and construction  under a single contract. In 2006, we reported that OBO’s Standard  Embassy Design (SED) and design-build approach had made significant  progress in expediting construction and helped to cut the average  completion time of projects to about 3 years—nearly half the time of  embassies built during the prior construction era following the 1983 Beirut  embassy bombing.

In 2011, in response to criticisms that some SED embassies had a  “fortress-like” appearance and were not as adaptable to local conditions,  OBO replaced the SED with a new Excellence in Diplomatic Facilities  initiative (Excellence). In contrast to SED, Excellence makes use of  customized designs for each embassy, which OBO maintains will improve  embassies’ functionality, quality, and operating costs, as well as their  appearance in representing the United States. However, stakeholders  have expressed concern that the Excellence approach may add to the cost to construct embassies and slow the rate of moving personnel into  more secure facilities. In a 2017 report, we examined the implementation  and evaluation of Excellence within OBO headquarters.

You asked us to review the performance of the CSCP. This report  examines (1) the pace of the program in constructing new embassies, (2)  the cost and schedule performance of State’s recent embassy  construction projects, and (3) factors that have affected State’s ability to  deliver construction projects efficiently.

To conduct this review, we obtained information from agency planning,  funding, and reporting documents and interviewed State officials within  OBO; the Bureau of Diplomatic Security (Diplomatic Security); and the  Office of Acquisitions Management. We also examined cost data drawn  from the Federal Procurement Data System as well as OBO-provided  data on contract costs and schedules, which we found to be sufficiently  reliable for our purposes. In addition, we also interviewed officials from  construction contractors that have built embassies for State. Further, we  selected nine construction projects as case studies from among projects  awarded in fiscal year 2008 through fiscal year 2015 and funded through  CSCP. Selection criteria included projects whose construction time  exceeded or was estimated to exceed 36 months (as informed by GAO’s  2006 assessment that early CSCP embassies were built in about 36  months and OBO’s projection that Excellence embassies will generally  not take any longer to build), or projects with actual or estimated  construction contract cost increases of more than 5 percent over initial  contract price at award (OBO’s typical cost contingency at contract  award), or projects meeting both conditions. We sought to include as  many different CSCP contractors in our case studies as possible from the  pool of eight contractors constructing embassies from fiscal year 2008  through fiscal year 2017. We also reviewed the design contracts for two  projects that had just begun construction. For each of our case studies,  OBO compiled relevant information into project narratives. In general, we  attribute information from these narratives to OBO.

In September 2017, we traveled to Jeddah, Saudi Arabia; Jakarta,  Indonesia; The Hague, Netherlands; and Pristina, Kosovo to observe  construction progress and meet with U.S. embassy officials responsible  for construction, facilities maintenance, post management, and security.  In addition we interviewed contractor officials in these locations and in the  United States. We also reviewed the results of a 2016 survey of OBO  staff. Specifically, we have included narrative responses from that survey  commenting on issues we encountered during our audit work for this  report. Views expressed in the survey may not be representative of all  OBO staff views on given topics. For more information on our OBO staff  survey, its results, and methodology, see GAO-17-296. See appendix I  for more information on our scope and methodology for this report.

We conducted this performance audit from April 2017 to September 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

Following terrorist attacks against the U.S. embassy in Beirut, Lebanon,  in 1983, State began an embassy construction program—known as the  Inman program—to protect U.S. personnel. However, as we’ve previously  reported, State completed only 24 of the 57 planned construction  projects, in part due to poor planning, systemic weaknesses in program  management, difficulties acquiring sites, schedule delays, cost increases,  and subsequent funding limitations. Following the demise of the Inman  program in the early 1990s, State initiated very few new embassy projects  until after the two 1998 embassy bombings in Kenya and Tanzania.  Following the bombings in Africa, the Secure Embassy Construction and  Counterterrorism Act of 1999 required State to develop and report a list of  diplomatic facilities scheduled for replacement based on their vulnerability  to terrorist attack. One of the congressional findings in the Secure  Embassy Construction and Counterterrorism Act of 1999 was that unless  embassy vulnerabilities are addressed in a sustained and financially  realistic manner, the lives and safety of U.S. employees in diplomatic  facilities will continue to be at risk from further terrorist attacks. State  subsequently initiated the CSCP to construct new embassies. The CSCP  is administered by OBO, which in April 2018 had about 1,135 direct-hire  civil service personnel, U.S. Foreign Service officers, and personal  services contractors stationed in Washington, D.C., and overseas.

The Secure Embassy Construction and Counterterrorism Act of 1999  calls for new diplomatic facilities to be sufficiently sized to ensure that all  U.S. government personnel at a post are located on a single secure site  and that those facilities are set back not less than 100 feet from the site’s  perimeter boundary. Before constructing a new embassy, State must  certify to Congress that, among other things, the facility’s design  incorporates adequate measures for protecting classified information and  activities as well as personnel working in the facilities. OBO contracts  with architectural and engineering firms (design firms) to develop bridging  or full designs meeting security and other project requirements. These  design firms submit their designs for reviews by OBO and Diplomatic  Security to ensure conformance with building code and security  standards, respectively. Diplomatic Security, in consultation with the  Office of the Director of National Intelligence, must certify that the design  meets security standards prior to the start of construction. While this  certification occurs during the design phase of a project, Diplomatic  Security also has other roles in the process, such as participating in site  selection, ensuring OBO contractors have necessary security clearances,  and ensuring facilities are securely constructed.

After passage of the Secure Embassy Construction and Counterterrorism  Act of 1999, State determined that embassies at 180 posts—out of 260  posts at the time—needed to be replaced to meet security standards.  State adjusted this milestone—to building 150 embassies by 2018—in  2005, when it worked with the Office of Management and Budget (OMB)  to establish the Capital Security Cost-Sharing Program (cost-sharing),  with a primary goal of accelerating the replacement of embassies.  Under cost-sharing, nearly 30 U.S. agencies with a presence in U.S.  embassies were to provide a total of $17.5 billion for constructing the  150 new embassies by 2018—12 years sooner than had been projected  without cost sharing. In justifying its cost-sharing approach, State  emphasized that, among other things, requiring agencies to pay for  overseas staff would make them more likely to closely assess the need  for each overseas position, thereby rightsizing overseas staffing levels.

OBO sought to expedite construction and control CSCP costs through  adoption of the SED and streamlined construction through a design-build  delivery method. The SED was a set of documents providing  prototypical plans for a medium-sized embassy including specifications  and design criteria, and explaining how to adapt those to a particular site  and project. The SED was not a complete design but rather a  standardized template for the structural, spatial, and security  requirements of a new embassy compound to guide a contractor’s final  design. Compound elements described by the SED generally included the  main office building; U.S. Marine security guards’ living quarters; a  warehouse; a utility building; compound access control buildings and  perimeter walls; and parking facilities. The SED also allowed for the  standardization of building components such as security windows and  doors. Figure 1 shows the prototypical facilities defined by the SED.

OBO combined the SED with the design-build delivery method, which  integrates completion of the design as well as all construction  responsibilities into a single contract. Under this model, the design-build  contractor is responsible for both design and construction and thus  generally bears the risks, such as added cost, for any design problems  because the contractor hires the design firm to bring the design to  completion. Under the SED approach, OBO hired its own design firms  beforehand to conduct project development activities such as planning  surveys, site studies, and other analyses needed to inform the project’s  design. OBO would utilize these design firms to develop a scope of work  and provide the design-build contractor a concept or schematic design  showing how OBO expected the office chancery and supporting embassy  facilities to be arranged on the site using the SED prototypical design to  include standard site and building plans, technical specifications, design  criteria, and instructions for its adaptation for a particular project and  contract requirements. The contractor’s design firm would then use the  SED documentation to develop a 100-percent completed design adapted  for a site at a particular post. Figure 2 provides an overview of the  embassy construction process under OBO’s implementation of design- build utilizing the SED.

In 2006, we reported that the SED approach and design-build delivery  method had enabled OBO to make significant progress in completing new  embassies and had helped to reduce the average time to complete  projects to about 3 years (36.7 months). This was nearly 3 years faster  than embassies built during the Inman era. However, while the SED approach enabled OBO to accelerate the construction of new embassies,  some stakeholders raised concerns about the aesthetics, quality, location,  and functionality of those facilities. Criticisms included that the SED  embassies had a “fortress-like” appearance that detracted from their  symbolic value in presenting American ideals of openness and  innovation; that the emphasis on speed and cost control resulted in  poorer-quality buildings and removal of functional elements such as  warehouses; that the 10-acre lot specified by the SED required siting  embassies too far from urban centers where foreign government offices  are located; and that the standardized aspects of its design were difficult  to adapt to unique site conditions and post needs.

To address some of these criticisms, OBO began to use design-build with  bridging (bridging) as a delivery method in 2008 with the first construction  project awarded in 2009. Generally under this method, OBO first  contracts with a design firm (the bridging architect) to develop a project- specific, partial design package (bridging design) that conveys State’s  design vision and a higher level of detail for key design requirements.  Such details that State might convey in a bridging design could include  the selection of specific building systems (e.g., the types of structural  foundation systems to be used for each building on the site) or post- specific security features (e.g., location, types, and heights of security  walls and bollards to be used around and within the site). Unlike the SED,  each bridging design is project-specific, customized, and separately  executed by an outside design firm contracted by OBO. The extent of  each bridging design varies by project but generally approximates an  overall 35- to 50-percent completed design, according to OBO officials.  OBO’s procedure is to then separately contract with a construction  contractor (and its own design firm) to complete the design and build the  project. Figure 3 provides an overview of the embassy construction  process under bridging.

Although customized, OBO’s bridging designs continued to use the SED  as a starting point for several years after OBO adopted bridging in 2008.  However, criticisms aimed at the underlying SED elements continued, for  instance, that the standardized design sometimes hindered adaptation of  designs in response to different climates, countries, or unique post  functions. In 2011, OBO initiated the Excellence approach, which placed  greater emphasis on custom designs for each project. OBO subsequently  phased out the SED as the basis for embassy designs, and according to  OBO officials, SED specifications, standards and guidance were  incorporated into OBO’s Design Standards and Design Guide.  According to OBO officials, by 2014, design firms hired by OBO to  develop bridging designs no longer used the SED as a starting point. In  addition, OBO shifted to greater use of the design-bid-build delivery  method alongside bridging. Generally under design-bid-build, OBO first  solicits and contracts with a design firm to develop a 100-percent design.  Under this method, OBO then uses the completed design to solicit bids  from prospective construction contractors. According to OBO  documentation, OBO selects a project’s delivery method, either bridging  or design-bid-build, based on an evaluation of a project’s local context,  complexity, construction factors, and urgency. Figure 4 provides an  overview of the embassy construction process under design-bid-build.

Under both bridging and design-bid-build, OBO generally bears greater  risk than it did under strict design-build in the SED approach. That is  because if design errors impact construction, the contractor may seek  additional costs and schedule relief from OBO for needed corrections and  changes it attributes to problems with the design provided by the  government. Additionally some stakeholders have expressed concern  that the added design-work inherent to the Excellence approach may add  to the cost to construct embassies and slow the rate of moving personnel  into more secure facilities. However, OBO has maintained that greater  design control under Excellence will improve embassies’ functionality,  quality, operating costs, and their overall public impact in representing the  United States.

State’s Project Delivery Pace Has Been Slower Than Projected, as Unforeseen Building Requirements and Inflation Have Affected Progress

Although State has built 77 new embassies since 1999 and at the end of  fiscal year 2017 had another 21 under construction, the CSCP’s project  delivery pace has fallen short of State’s 2005 target of constructing 150  new embassies by 2018. This is due, in part, to unexpected building  requirements and the effects of inflation. In 2012, recognizing the  erosion of purchasing power as a result of inflation, the Benghazi  Accountability Review Board (ARB) recommended State work with  Congress to increase the CSCP’s annual funding level from $1.4 billion to  approximately $2.2 billion in fiscal year 2015 and for up to 10 years  thereafter. OBO plans to begin construction of 25 embassies in fiscal  years 2018–2022 and nearly 50 more beyond fiscal year 2022, but it is  unclear whether OBO can maintain its average pace of 5 new embassy  contract awards per year—particularly as State has not defined the  overall capital cost and potential timeframes needed to achieve this goal,  nor does it currently expect to seek year-to-year adjustments for inflation.

State Will Not Meet Its Original Project Delivery Goals

Although State has made progress in constructing more secure  embassies, State’s CSCP will not achieve the target of constructing 150  new embassies by 2018, a milestone that the 2005 cost-sharing was  intended to facilitate. From fiscal year 1999 through 2017, State  completed 77 new embassies and had 21 under construction. In fiscal  year 2017, State also forecast a potential need for 72 additional  embassies beyond those completed or under construction. Of those 72,  State planned to begin construction on 25 new embassies in fiscal years  2018 through 2022, at an estimated pace of 5 new starts per year. The  remaining 47 locations were identified by State as candidates for new  embassy compounds beyond 2022. Figure 5 shows the status of CSCP  embassy projects as of the end of fiscal year 2017.

Total CSCP funding from 1999 through 2017 reached approximately  $24.2 billion (in nominal dollars). Figure 6 shows the cumulative progress  in completing the 77 embassies along with year-to-year cumulative  funding from fiscal year 1999 through fiscal year 2017.

State’s CSCP will not achieve the 2005 target of constructing 150 new  embassies by 2018. To achieve this target, State would have had to  complete an average of about 10 embassies per year. Instead, on  average, State has completed 5 new embassy compounds each year  since cost-sharing was authorized in 2005. If State’s project delivery pace  remains unchanged, it would take more than 15 years to complete the 72  new embassies identified in State’s CSCP planning schedule at the end  of fiscal year 2017.

The CSCP Has Had to Cover Unforeseen Additional Building Requirements and Has Received One Inflation Adjustment

The pace of CSCP has been affected by unexpected building  requirements and inflation. Beyond the 77 completed embassies and the  21 under construction, the $24 billion for CSCP since 1999 has also  funded additional building requirements that State had not originally  envisioned. According to State, these unforeseen requirements  included:  1.  On-compound staff housing at some posts, such as Beirut;  2.  New or reopened posts, such as Kabul,  3.  Marine security guard quarters on some new and existing  compounds, such as Monterrey, in response to a recommendation in  the 2012 Benghazi ARB report and as State revised its policy  governing the presence of U.S. Marines at some posts.  4.  New security requirements at high threat posts—such as taller  perimeter walls, guard towers, and unique security support spaces.  5.  Office annexes; for example OBO is now building new annexes in  Kampala, Uganda and Nairobi, Kenya, posts where new embassies  were completed in 2001 and 2006 respectively. From 1999 through  2017 State completed 28 annex office buildings under the CSCP— such as for U.S. Agency for International Development—or acquired  buildings and upgraded them for use as an embassy.

Figure 7 shows completed annex projects along with embassy  completions. OBO officials told us that unforeseen requirements continue  to affect the CSCP.

Over time, CSCP funding has also been subject to the effects of inflation.  The 1999 ARB following the bombings of U.S. embassies in Tanzania  and Kenya recommended that embassy construction and other security  improvements be funded at $1.4 billion per year over 10 years. With the  introduction of cost-sharing in 2005, State set an annual CSCP funding  goal of $1.4 billion, as the 1999 ARB had recommended, as well as the  goal of completing 150 new embassies by 2018 for a projected funding  total of $17.5 billion. However, State officials indicated that when the  program was established, no provision was made for potential inflation  over the life of the program. Therefore, while CSCP funding generally  increased from 2005 through 2010, OBO officials stated that CSCP  funding gradually purchased less than anticipated due to the lack of an  inflation adjustment. This absence of inflation as a built-in factor in  program planning is in contrast to OBO’s cost estimates for individual new  embassy projects. Those project-level cost projections account for  inflation and recognize that the projects will typically take at least 3 years  to build. If annual CSCP program-level funding is held constant as  individual project costs generally increase over time, fewer projects can  be funded in later years of the program resulting in a slower pace of  project delivery.

In 2012, recognizing the erosion of purchasing power as a result of  inflation, the Benghazi ARB recommended that State work with Congress  to restore the CSCP capacity to its earlier level by increasing its annual  funding level to approximately $2.2 billion starting in fiscal year 2015 and  for up to 10 years thereafter. Based on State data, that recommended  funding level was not met in 2015, but was generally met in fiscal years  2016 and 2017 due to the provision of additional Overseas Contingency  Operations funding. In general, according to OBO, such funding is used  to support State requirements in high-threat locations, which, according to  OBO, are subject to the highest rates of project cost change. State  generally considers this funding to be non-enduring and supplemental to  funding through State’s regular budgets. Figure 8 shows State funding  data representing the total annual CSCP funding from fiscal year 1999  through 2017—including cost-sharing, supplemental, and Overseas  Contingency Operations funding—compared with State’s 2005 CSCP  funding goal ($1.4 billion annually) and the 2012 Benghazi ARB annual  funding recommendation ($2.2 billion annually), proposed for  implementation in fiscal year 2015.

State Has Not Estimated Total CSCP Cost and Time Frame and Has Not Planned for Future Inflation

Lack of Reliable Data on the Number of  Staff Moved into New Embassies  The number of U.S. government staff moved  into more secure facilities has been a  reported performance measure for the Capital  Security Construction Program (CSCP) since  the time of the Standard Embassy Design  approach. For example, the U.S. Department  of State (State) reported moving over 30,000  people (out of more than 86,000) into more  secure facilities from 2000 through 2014.      We attempted to assess CSCP performance  on this measure on a project-by-project basis  but found it unreliable for the purpose of  establishing how many staff have been  moved into newly constructed facilities.  State’s Bureau of Overseas Buildings  Operations (OBO) officials explained that the  “number of staff moved” metric was based on  the projected desk and non-desk positions  within each embassy construction contract.  However, OBO never established a policy or  procedure on how these data should be  collected, managed, or validated. The data  for this metric were informally tracked within  OBO’s Office of Construction Management.    As a result, information for this performance  measure is inconsistent, precluding a  progress assessment of the CSCP using this  metric. For example, totals for some years  included data for major renovation projects of  existing buildings while other years’ data may  have included acquired buildings purchased  by State (and built by others).   In 2017, we found State’s one strategic  CSCP-related performance indicator—the  relocation of staff into more secure and  functional facilities—provides no performance  assessment on the extent to which  Excellence facilities are any more functional,  sustainable, or effective in supporting U.S.  diplomacy. We recommended State  determine whether this measure is still  appropriate or needs to be revised. According  to OBO officials, this metric is being revisited  as part of a broader evaluation of OBO’s  performance measures. See GAO-17-296.

Although the CSCP schedule for fiscal year 2017 identifies nearly 75  embassies still requiring replacement, the overall capital cost and likely  time frame expected to achieve the program’s goal are unknown, as OBO  has not made such estimates. According to OBO officials, State is not  focused on replacing a set number of embassies within an estimated total  capital investment cost (e.g., 150 embassies for $17.5 billion, as planned   in 2005) or by a given end-date (e.g., 150 embassies by 2018, as planned  in 2005). Rather, OBO’s approach is to request $2.2 billion annually in  accordance with the Benghazi ARB’s recommendation. According to  these officials, this approach allows agencies that contribute to cost- sharing to consistently plan for a predictable funding level, and OBO will  work to complete as many projects as soon as possible within this annual  funding level. Further, they noted that State does not intend to seek  annual inflation adjustments for the CSCP.

In general, according to OBO policy, the CSCP is guided by Diplomatic  Security’s annual Security Environment Threat List of security rankings  for posts, from which OBO develops a “Top 80” list of the 80 most at-risk  posts needing a new embassy. OBO uses the Top 80 list to develop  and adjust the CSCP schedule, which presents planned embassy awards  for the current fiscal year and for each of the next 5 fiscal years. For  example, the November 2016 CSCP schedule (current at the end of fiscal  year 2017) listed the 5 posts slated for awards in fiscal year 2017. In  addition, it listed the 25 posts slated for awards in fiscal years 2018  through 2022, grouped by the specific fiscal year when OBO anticipated  being able to award the relevant construction contracts. The nearly 50  embassies planned for beyond fiscal year 2022 were broadly categorized  in an “out-year” category in the November 2016 CSCP schedule.

According to leading practices in capital decision-making we have  previously identified, agencies’ long-term capital plans should provide  insight into likely funding and other resources and time frames needed to  achieve organizational mission goals. We also noted in our guide to  leading practices that, while out-year cost estimates are preliminary, they  help provide decision makers with an overall sense of funding needs and  that such long-range planning assists in developing both current and  future budgets.

OBO’s fiscal year 2017 CSCP schedule does not identify estimated costs,  either at the project or aggregate level. According to OBO officials,  scope, cost, and size estimates are communicated on a project-specific  basis to stakeholders through briefings and each fiscal year’s  congressional notifications listing projects to be implemented in the  coming years. According to these officials, the CSCP schedule is  intended to be a flexible way to communicate a snapshot of OBO’s  prioritization of posts to receive embassy awards over the next 5 fiscal  years, emphasizing that the exact list can change. For example, a new  embassy project might be advanced sooner than originally planned due to  a change in State’s security or policy priorities. Conversely, a project may  be moved out to a later fiscal year due to challenges that OBO believes  may be posed by the host government or other challenges identified  during or after site acquisition. Although the CSCP does track the  projected timing of some specific projects, State lacks a strategic planning  document that estimates longer term CSCP resource needs. For  example, the CSCP schedule contains no estimated 5-year program cost  for the next 25 embassies OBO plans to build, nor does it provide  stakeholders an estimate or cost range for the total capital investment  and feasible time frames needed to address the 47 embassies that OBO  has identified for replacement beyond the next 5 years.

Additionally, guidance from OMB indicates that when developing budget  estimates agencies should consider the effect that economic or other  changes can have on program levels beyond the budget year. OMB  guidance further states that agencies should be prepared to discuss the  impact that program levels and changes in methods of program delivery  will have on program operations and administration. OMB guidance  states that for discretionary programs, agencies may include an  allowance for the full rate of anticipated inflation, less than the full rate, or  no allowance for inflation. The guidance recognizes that agencies must  make trade-offs between budget increases for inflation versus other  increases for programmatic purposes.

Given that it contains no cost information, the CSCP schedule is not  meant to be a tool to forecast and convey to stakeholders the long-term  effects of inflation on program capacity. Therefore, considering the 72  embassies yet to be replaced, past inflationary effects, and the CSCP’s  pace thus far, it is unclear what pace OBO will be able to maintain without  some level of inflation adjustment to its funding goal of $2.2 billion per  year. Without information on the projected pace of construction and  estimated effects of inflation, stakeholders’ may lack complete information  to make fully-informed budget decisions.

Completed Embassy Projects Have Generally Stayed within Budgeting and Planning Allowances

While cost growth occurred on a majority of completed embassy projects  and durations averaged about 36 months, these were generally within  budgeting and planning allowances. We could not assess cost and  schedule performance of projects begun under the Excellence approach  because none had been completed by 2017. OBO maintains that the  greater upfront investment in more customized designs under this  approach will yield long-term benefits in embassies’ functionality, quality,  and operating costs, as well as in their appearance in representing the  United States. While an assessment of those potential benefits cannot be  made at this time, we did find examples of Excellence and Excellence-like  projects illustrating how innovative designs can increase upfront project  costs.

Contract Costs for Most Completed Projects Have Increased but Generally Stayed within Contingency Allowances

While construction contract costs increased after award for most of the 22  completed projects we reviewed, the increases were generally less than  contingency allowances, and most projects were completed within their  contingency budgets. State reserves a contingency amount in its project  budget—ranging from 5 to 10 percent of the contract value at award—to  cover unforeseen project changes and cost increases. OBO’s overall  project budgets also include funding for other nonconstruction costs and  contracts, such as planning, design, and on-site project management and  security.

For the 22 completed embassy construction projects we reviewed, 16  (almost 75 percent) were finished within 10 percent or less of the original  contract value at award, and 3 of these 16 projects finished under the  original contract value at award. Six of the projects (over 25 percent)  exceeded the original contract value at award by over 10 percent.

For the 6 projects whose final costs were more than 10 percent over the  original contract value at award, some of the cost increases were due to  events unrelated to original design or construction issues. For example, in  Khartoum, Sudan, OBO project documentation indicates that the contract  increase was due, in part, to host government restrictions on the  importation of needed construction materials and having to restart the  project. In other instances, as discussed earlier, additional building  requirements increased project costs. For example, OBO officials noted  that a U.S. Agency for International Development office annex was added  to the embassy project in Kyiv, Ukraine, and Marine security guard  quarters were added to the projects in Monterrey, Mexico; Mbabane,  Swaziland; and Vientiane, Laos.

Table 1 shows the original construction contract value at award and the  final or current contract value for the 22 completed projects as of the end  of fiscal year 2017. Of these 22 projects, 16 were SEDs; four were  “Excellence-like,” meaning they were transition projects awarded after  OBO’s 2011 decision to institute Excellence but before OBO finished  implementing Excellence in 2014; and 2 were not based on the SED  template but predated the Excellence initiative. Contract value for some  completed projects may change, in part due to outstanding requests for  costs from the contractor or legal claims. Our cost assessment of the 22  completed projects included no Excellence projects, as none had been  completed as of the end of fiscal year 2017.

For the 21 ongoing construction projects that we reviewed, 14 (including 7  Excellence projects and 4 Excellence-like projects) had experienced  some cost growth beyond the original contract value at award as of the  end of fiscal year 2017. Because these were ongoing projects and 6 of  the 21 had been awarded in fiscal year 2017 and therefore had not  substantially progressed, we could not determine whether they would  finish within their budget contingency, nor could we compare cost  increases of Excellence projects—none of which had been completed— with cost increases of SED projects. See appendix II for the cost status of  these ongoing projects as of the end of fiscal year 2017.

Innovative Designs Can Increase Project Costs

OBO maintains that its greater upfront investment in unique designs  under Excellence will yield long-term benefits in embassies’ functionality,  quality, and operating costs, as well as their appearance in representing  the United States. Critics of the Excellence program assert that aspects of  unique designs, such as buildings’ shapes and layouts, construction  materials, or the architectural products used, are often expensive to  design, build, and maintain. For example, some Excellence or  Excellence-like designs specify stylized, custom-built architectural  facades that are to be installed on the buildings’ exteriors. These can  include cantilevered roofs; customized windows; architectural screens;  glass curtain-wall systems; or very specific stone, brick, or concrete  work. Some critics have also raised concerns about some aspects of  buildings’ interior architectural features. For example a project official  reported to us that State could have saved nearly $950,000 had it utilized  an aluminum handrail—rather than a bronze handrail—for one embassy’s  main staircase. The bridging design called for all metal site furnishings  and railings to be a bronze tone in color. The bridging designer  specifically indicated the use of bronze color throughout the design was  intended to relate to the local metal craft of the region. An OBO official we  spoke with indicated that while he understood there might be some  savings for changing the handrail to aluminum, he felt the designer’s  intent in specifying the use of a bronze handrail was clear and was  approved by OBO during the design review process, and thus he did not  feel it would be appropriate to make a change. Figure 9 depicts the more  custom and stylized Excellence exterior designs alongside more  standardized SED projects.

In reviewing our case study projects, we found instances of custom  exteriors that had led to greater construction costs. For example, OBO  project documentation shows the use of a customized glass exterior wall  designed for the Jakarta, Indonesia, embassy significantly impacted cost  and schedule after contract award, adding at least $18 million to the cost  and 180 days to the schedule. According to project documentation as well  as OBO and contractor officials, OBO’s decision to employ a unique glass  curtain-wall system for that project and subsequent questions raised by  Diplomatic Security about the design, led OBO to modify the contract to  add (1) $2.2 million and 180 added days to explore alternative designs  and conduct redesign work in order to obtain Diplomatic Security  certification; (2) $13.3 million, which OBO told us was for a dedicated  facility to be established in the United States to securely fabricate the  glass curtain wall before secure shipment to the site; and (3) $3 million to  have cleared American workers install portions of the wall. OBO had not  previously employed such a system in a completed embassy project and  could not provide us with documentation analyzing the risks of such a  feature to cost and schedule—which might have included potential delays  to get Diplomatic Security’s approval of the design—compared with  conventional concrete construction. Figure 10 shows this glass curtain  wall under construction.

Additionally, on the Hyderabad, India, project, OBO project  documentation shows the initial design of the unique exterior screen  concerned OBO management, leading to more design development by  the contract architect, further review by OBO’s design staff, and added  cost. Senior management expressed concerns about the appearance of  the screen, mainly that the screen was too traditional compared with the  spirit of the design of the building and the rest of the campus and that the  pattern of the screen needed more variation for daylight and views. To  respond to this concern, OBO issued two contract modifications to OBO’s  architect for additional design work for the exterior screen. OBO told us  that subsequent design development for three alternatives for the screen  contributed an additional design cost of about $750,000, raising the final  bridging design cost to approximately $10.5 million. That figure excludes  roughly $816,000 for support services during construction, of which OBO  reports a minor portion was attributable to ensuring that the construction  contractor achieved the design intent for the exterior screen. Figure 11  shows schematic design renderings of the approved screen design.

In our 2016 survey of OBO staff, several staff indicated that unique  Excellence project designs can impact costs. Table 2 provides  examples of such comments.

Construction of Completed Projects Averaged Around 36 Months

For the 22 completed embassies we reviewed, the average time to  completion was just over 36 months, though with some distinctive  outliers. To assess schedule, we compared embassy construction  durations with a benchmark of 36 months. We used that planning  allowance because, in the past, OBO has maintained that a SED would  generally take no more than 36 months to construct and that construction  durations would not be any different under Excellence. For the 22  completed construction projects, 14 (about 64 percent) were completed in  36 months or less, including one Excellence-like project. The remaining 8  projects (36 percent) were completed in over 36 months, including 4 SED  projects and 3 Excellence-like projects.

Construction durations can be affected by factors not controlled by the  U.S. government, such as host government relations, adverse security  conditions, or border/port closures. For example, one schedule outlier  was due to a work stoppage and restart in Khartoum, Sudan, where the  short schedule does not capture the construction activities performed  under an earlier 2005 contract. Other events extending construction  duration included, as referenced earlier, the addition of U.S. Marine  security guard quarters to the projects in Monterrey, Mexico and  Mbabane, Swaziland, as well as delays related to host government  permitting issues in Bishkek,  Kyrgyzstan, according to State project  documentation. Figure 12 summarizes schedule performance on the  basis of construction duration for these 22 completed embassy  construction projects. Our schedule assessment of 22 completed projects  included no Excellence projects, as none had been completed as of the  end of fiscal year 2017.

We did not assess the final schedule performance of the 21 construction  projects ongoing at the end of fiscal year 2017 because there were at  different stages of construction. As a result, it is too early to draw  conclusions regarding schedule performance of individual Excellence  projects compared with SED projects. See appendix II for the schedule  status of these projects as of the end of fiscal year 2017.

Staffing Workload and Contractor Collaboration Challenges Impede Efficiency of Project Delivery

After shifting to the use of more customized designs under Excellence, it  is unclear if OBO’s staffing levels, particularly in its Office of Design and  Engineering (Design and Engineering), are sufficient to execute its full  workload. Staffing workload challenges were cited by program  stakeholders across the organization, but no strategic workforce analysis  exists to fully assess OBO’s human capital capacity against the full range  of its real property responsibilities, including the CSCP. With regard to  project implementation, formal partnering between OBO and its  construction contractors could help avoid adversarial relationships that  inhibit swift resolution of issues.

It Is Unclear If OBO’s Staffing Is Commensurate with Its Workload under the Excellence Approach OBO Faces Staffing Workload Challenges in Design and Other Offices

According to OBO officials, OBO’s workload and responsibilities exceed  its available staff. In April 2018, OBO officials told us the bureau’s  authorized federal staffing level—including both domestic and overseas  positions—is 1,415 positions. However, according to OBO officials  roughly 280 (about 20 percent) were vacant due to both attrition and  State’s recent hiring freeze. OBO federal staff at that time consisted of  approximately 1,135 people, including direct-hire civil service and Foreign  Service staff, as well as personal services contractors (PSC) whom  OBO defines as individuals who have direct employment contracts with  State. In addition, OBO is supported by nearly 300 individuals who are employed by companies that provide those individuals to OBO as  supplemental staff. Those 300 individuals are referred to by State as  third-party contractors because their employment contracts are not with  State but rather with their respective companies.

Design and Engineering is one of the key offices supporting Excellence.  According to OBO budget planning documents and the Managing Director  of the directorate that includes Design and Engineering, this office has  faced workload and staffing challenges for several years. Some OBO  officials told us that the office’s need for more staff has been ongoing  since 2014, which roughly corresponds with OBO’s full implementation of  Excellence. In 2015, the staff within Design and Engineering conducted  a workload and workforce review in preparation for the office’s annual,  internal budget planning process. Based on that review, the Director of  Design and Engineering briefed OBO’s Director and Deputy Director that  some critical functions were not being performed or had been diminished,  including quality design reviews (insufficient depth of review); advanced  planning (master planning, feasibility studies); project analysis (scenario  planning, life cycle analysis); and guidance to design firms (limited  interactions).

In the 2015 briefing, the Director of Design and Engineering proposed two  courses of action to OBO’s Director and Deputy Director: (1) workload  prioritization or (2) workforce increase. The first approach sought to  identify critical workload responsibilities—such as new embassy  construction—that the existing staff should prioritize over other  responsibilities that may need to be addressed with additional staffing or  outsourced to private industry. The second approach, increasing the  workforce, proposed that OBO hire more Design and Engineering staff to  support all the office’s responsibilities. According to a senior OBO official,  OBO’s Deputy Director at the time determined the best course of action  was to implement a workforce increase, and in 2016 he instructed Design  and Engineering’s Director to plan to increase the office’s authorized staff  from approximately 150 to 250 people over several years. However,  OBO officials told us this decision was a goal at that time and did not  reflect any formal staffing authorization by OBO or State; for that reason,  it was not reflected in any OBO human capital staffing assessment or  plan. In the interim, until Design and Engineering could get authority and  funding for more federal direct-hire or PSC positions, OBO planned to  make increased use of third-party contractors. Since 2015, direct-hire  authorized staffing levels for this office generally have not increased.

In April 2018, OBO officials indicated that Design and Engineering  needed about 300 staff to meet the office’s workload responsibilities.  Design and Engineering’s internal 2018 budget planning documents show  that since fiscal year 2015, the office has had 154 authorized civil service  and PSC positions. However, in April 2018 OBO reported to us that  Design and Engineering had filled only 108 of the 154 authorized  positions, amounting to a vacancy rate of roughly 30 percent. OBO also  reported that Design and Engineering was using 31 temporary third-party  contractors, for a total combined on-board federal and contractor staffing  level of 139 positons. Design and Engineering’s internal fiscal year 2018  budget planning documents show that the office proposed to increase its  authorized staff level from 154 positions to 304 positions by 2020,  effectively increasing by 50 positions each fiscal year.

According to senior OBO officials, requests for increased federal staffing  for Design and Engineering and other OBO offices have generally not  been approved since at least fiscal year 2015, in part, because of general budgeting and fiscal constraints. OBO officials indicated the denials of  staffing requests were generally executive-level decisions made at  different stages during the budget planning process within OBO, State,  and OMB. In general, OBO officials characterized those decisions as  common when agencies are under pressure to control program costs.

Design and Engineering Announcements  The following are examples of third-party  contractor job announcements for positons  intended to support the Office of Design and  Engineering in the Bureau of Overseas  Buildings Operations (OBO):

Senior Architect – fills OBO “fluctuating  skill needs and gaps” in architecture  design, project planning, building code  analysis, and construction design  reviews; reviews plans, specification and  technical reports; mentors more junior  architects.

As previously noted, Design and Engineering is utilizing private-sector  companies to hire temporary third-party contractors in order to execute its  workload and, in part, until OBO can receive authority to hire additional  direct-hire staff. According to OBO officials, OBO in the past has primarily  used third-party contractors to meet needs that were genuinely of a  temporary nature, such as to conduct planning surveys and staff  overseas projects during construction. More recently, however, OBO has  begun to rely more on third-party contractors to provide key professional  capabilities, as evidenced by some recent contractor hiring  announcements for positons intended to support Design and Engineering  (see sidebar). senior expert on interior design and  space planning; reviews construction  submittals; advises on contract bids,  change orders, schedule extensions, cost  increases; coordinates on planned  embassy spaces with Diplomatic  Security, the intelligence community, and  OBO’s construction contractors.

We previously reported that new embassies are state-of-art facilities that  have unique security features and whose designs must be certified by  State as meeting security standards prior to the start of construction.  Design reviews to assess proposed project designs in accordance with  State standards and building codes are a key responsibility of Design and  Engineering. Such reviews are important to the success of a construction  project because insufficient design reviews by agency staff can lead to  design errors and omissions that can affect project cost and schedule.

Federal Facilities Council Study on Design  Oversight  The Federal Facilities Council report indicated  that to provide effective design oversight an  agency’s interest is best served if the in-house  staff can fulfill the functions of a “smart buyer,”  whereby the agency retains in-house staff that  understands the agency’s mission, its  requirements, and customer needs. The  council noted that if the agency does not have  the staff capacity to operate as a smart buyer,  an agency risks project schedule and cost  overruns, as well as facilities that do not meet  performance objectives.   The Federal Facilities Council also reported  that uncontrollable circumstances have  resulted in nearly all agencies’ engineering  functions being contracted to outside  consultants at one time or another. As long as  sufficient skills are retained in-house to meet  the smart buyer approach, according to the  council report, there does not appear to be  any greater risk from contracting out a  broader range of design review functions  including construction document reviews and  code compliance. However, complex projects  that include unique and specialized features  of high mission relevance, such as high- security facilities, were an exception cited by  the council. When federal agencies are  building such unique facilities, the council  advised that they retain key expertise in- house as core competencies, with design  review a primary in-house responsibility. quality, and performance. The council also concluded that effective  design review processes result in more comprehensive and accurate  design and construction documents that, in turn, lower project costs. (See  sidebar for additional information on the council’s report.)

Construction contractors we spoke with expressed concerns about the  quality of OBO’s design reviews and capabilities to manage the amount of  questions from construction contractors about OBO’s Excellence designs.  Two contractors believe OBO is using more third-party contractors to  perform design reviews than it did previously and that some may lack  specialized knowledge of embassy standards and security measures. The  two contractors said that this may lead to lack of design consistency and  continuity across projects. One construction contractor also indicated  OBO takes more time to resolve design issues because it typically will  consult with OBO’s contracted Excellence design firm before answering a  construction contractor’s design-related question or approving a design  change that may arise during construction. In our 2016 survey, several  OBO staff raised concerns regarding OBO’s capability to perform design  oversight with existing staff. Table 3 lists some of those selected staff  comments.

OBO senior management stated that similar staffing challenges  compared with workload also exist in OBO’s Construction, Facility, and  Security Management directorate. According to OBO documentation the  Office of Construction Management is authorized 111 direct hire Foreign  Service Construction Engineers worldwide but as of March 2018, it had  86, amounting to about a 20 percent vacancy rate. Those direct-hire  Foreign Service engineers typically serve overseas as Project Directors  (PD) for an embassy construction project.

Other Third-Party Contractor Job  Announcements  We found examples of third-party contractor  job announcements intended to support the  Bureau of Overseas Buildings Operations  Office of Construction, Facility, and Security  Management directorate:

Construction Management Program  Analyst – reports on projects’ problem  areas for resolution; monitors projects’  financial progress; prepares change  requests and contract modifications;  documents scope, cost, or schedule  changes; provides guidance and training  to lower level analysts; ensures internal  controls and data integrity.

According to the Office of Construction Management’s 2018 internal  budget planning documents, the office sought to covert 50 third-party  contractors deployed overseas to direct-hire PSCs. Those positions— typically civil, electrical, or mechanical engineers—serve as on-site  technical staff under the PD, to oversee construction activities and  respond to construction contractors’ questions or proposed changes.

Facility Manager – serves on an interim  basis at posts lacking a facility manager;  deals with unusual or emergency facility- related conditions that may impact  embassy operations; oversees the day- to-day safe operation and maintenance of  embassy facilities; manages post’s  building maintenance staff; performs  design reviews.

Similarly, OBO’s Office of Facility Management reported to us that, for  fiscal year 2018, it expected that it may be unable to fill 33 (about 15  percent) of its 224 authorized Foreign Service Facility Manager positions,  at both newer and existing legacy embassies. Those positons serve as  the single U.S. facilities officer overseeing primarily locally hired embassy  staff that operate and maintain embassy building systems. As of March  2018, OBO reported it was trying to cover these positions through  temporary staff assignments for 2 to 3 months. As with Design and  Engineering, we found examples of positions within Construction,  Facilities, and Security Management—including Facility Managers— where OBO was relying on third-party contractors to provide key  professional capabilities (see sidebar).

Physical Security Specialist – reviews  design plans, especially for sensitive  embassy spaces; oversees transit  security plans for sensitive project  materials; determines on-site construction  security staffing needs; serves on  interagency security committees;  prepares responses to State’s Inspector  General, GAO, and Congressional  inquiries.

Despite OBO-wide workload and staffing challenges, OBO cannot  precisely quantify these challenges or their effects because it lacks a  strategic workforce assessment of OBO-wide staffing levels and workload  capacity needed to support the CSCP under Excellence. According to  OBO, Excellence is a holistic effort to improve every aspect of OBO’s  operations, including real estate acquisition, security methods and  technologies, cost management, construction management, and facilities  management. OBO’s “Guiding Principles for Excellence in Diplomatic  Facilities” conveyed that delivering Excellence would be a comprehensive  process that seeks to utilize the best methods, technologies, and staff  abilities and that each ofﬁce, person, and action in OBO contributes to the  realization of this goal. However, OBO’s 2011 decision memo approving  the shift to Excellence did not identify possible effects to OBO-wide  workload, staff levels, and personnel costs, including likely costs to hire  either more federal staff or third-party contractors. In addition, the  decision memo did not address whether the new design-centric program  might affect the staffing needs to manage other OBO responsibilities,  such as renovations and security upgrades to existing embassies.

As we have previously reported, the use of bridging and design-bid-build  under Excellence entails a time and cost investment in design on the  project’s front-end. When two contracts are utilized by OBO—one for  design and one for construction—additional administrative and  programmatic effort is needed to develop, award, and manage multiple  contracts. Diplomatic Security officials also reported to us that reviewing  customized Excellence designs increased their workload.

In 1999, OPM published a five-step model that suggests agencies should  define their strategic direction, assess their current and future workforces,  and develop and implement action plans for closing identified gaps in  future workforce needs. Further, according to GAO human capital best  practices, strategic workforce planning addresses two critical needs: (1)  aligning an organization’s human capital program with its current and  emerging mission and programmatic goals and (2) developing long-term  strategies for acquiring, developing, and retaining staff to achieve  programmatic goals. Without an OBO-wide analysis of workload  capacity and existing staffing, State senior managers and key program  stakeholders will lack essential information to make decisions about  workload priorities, staffing resources, and budget needs pertaining to  CSCP and OBO’s Excellence approach.

Formal Partnering during Construction Could Help Avoid Collaboration Challenges That Affect Efficiency of Project Delivery

Working collaboratively as a team to efficiently deliver new embassies  has been a challenge for OBO and some of its construction contractors.  OBO officials said some construction contractors selected to build new  embassies have struggled to deliver projects, in part because they had  less experience in terms of the number of embassies they had built, or  were new to the embassy program. Construction contractors have to  learn a great deal of information very quickly—to include State security  standards, design specifications, and operating procedures—and many  do not succeed, according to these OBO officials. Of the six contractors  involved with our nine project case studies, four of the five that we spoke  with relayed concerns about poor working relationships with some OBO  on-site Project Directors (PD) and that OBO was a difficult business  partner, similar to concerns raised about OBO that we have previously  reported. Formal construction partnering (partnering) is a recognized  construction industry best practice to foster improved collaboration and  problem solving and continues to be utilized by major federal construction  agencies.

On-Site OBO-Contractor Relationship Is Important to Project Collaboration

Contractor and OBO officials stressed the importance of the on-site  relationship between the OBO PD and the contractor in successfully  completing projects. According to State policy, OBO’s PDs are the  Contracting Officer’s Representative at the site and have primary  responsibility for overseeing the contractor. The PD serves as State’s  principal technical contact for the construction contractor and reviews all  change proposals. Per OBO guidance, the PD (under advisement with  Design and Engineering) renders interpretations of the contract plans and  specifications and acts as arbiter of any technical disputes with the  contractor. In cases where the recommended proposal amount exceeds  the PD’s dollar-value authority for changes, the PD makes a  recommendation for action to State’s Contracting Officer in Washington,  D.C.

OBO and contractor officials indicated that OBO’s PDs are critical to the  success of embassy projects and noted that while some PDs make an  active effort to collaborate with contractors, other PDs do not. Our  interviews with OBO and contractor officials reflected that PDs who do not  collaborate well can have a challenging relationship with the contractor  that makes it difficult to reach timely solutions to project and contract  issues. In addition, contractor officials stated that strained relationships  with some PDs may be further exacerbated because OBO headquarters  often takes too long to make decisions—in support of their PDs in the  field—on proposed changes and additional work that State is considering  or that contractors propose as being needed. Three of the five  contractors we spoke with cited such concerns about PDs and OBO  headquarters as a long-standing or systemic issue. Officials from one  contractor indicated that when PD-contractor disagreements arise and  combine with delays by OBO headquarters, an issue that could be  resolved at a lower cost or schedule impact can become a critical  problem leading to greater cost and schedule impacts for the government,  the contractor, or both.

Senior OBO officials acknowledged differing styles and capabilities  among OBO’s PDs, as well as the need to improve response times in  OBO headquarters. With regard to PDs, senior OBO officials stated that  some PDs’ working styles are more proactive in cooperatively seeking to  resolve issues face-to-face and through meetings with the contractor’s  on-site team; conversely, other PDs’ styles are more geared to  corresponding with the contractor’s team through written communication  and contractual correspondence. One of these officials stated that he did  not believe the latter style was as effective, but that it is sometimes  needed when contract issues cannot be solved by the two sides.

Another OBO official stated that OBO needs to look beyond individuals’  technical engineering or architectural skills and experience and examine  their “soft skills”—such as communication abilities, problem-solving skills,  and how they work with others—to better assess who might excel when  OBO assigns staff to projects. According to OBO officials, it can be very  challenging to determine whether and to what degree a PD is reasonably  enforcing the contract and doing their best to collaborate with the  contractor to resolve project issues that arise.

OBO Headquarters-Contractor Response Times Are Also a Collaboration Issue

Regarding response times, senior OBO officials stated that OBO is  working to improve turnaround on proposed changes during construction.  However, they emphasized the necessity of PDs frequently having to go  back to OBO headquarters to ensure an on-site change proposal is in  accordance with OBO’s contracted designer’s intent as well as State’s  design and security standards. In addition, they stated that lack of timely  responses can sometimes be the fault of the contractor, particularly if the  contractor is less experienced with embassy construction or new to the  program and unfamiliar with OBO’s process requirements.

OBO now allows for more time to resolve contractor requests for  equitable adjustment that involve increases to contract cost or schedule  than it had in the past. In 2008, OBO guidance called for State to  acknowledge in writing contractors’ requests for equitable adjustments— due to cost or schedule changes—within 3 days and to seek to evaluate  the merits of such requests and make final decisions within 55 days. In  2016, State changed its guidance to allow 15 days to acknowledge  contractors’ requests for equitable adjustments and 90 days for State to  make a final decision. OBO documentation indicates that the process  can take even longer than 90 days if State determines that the contractor  has not provided enough information for State to assess the merits of the  request for additional time or cost. Two of the contractors we spoke with  stated that excessive delays in responding to a request for an equitable  adjustment can increase the likelihood of contractor-initiated litigation.  With regard to changes initiated by State, contractors were also frustrated  when OBO issues a request for proposal to a contractor—to provide a  price and schedule for the prospective change—and then OBO does not  make a timely decision as to whether it wants to implement the change.

OBO officials said they are trying to shorten the time it takes them to  make decisions concerning contractors’ requests for information,  proposals for equitable adjustments to contract price or schedule, and  OBO proposals to undertake additional work. In April 2018, OBO officials  noted that they recently expanded the scope included in OBO’s generic  statement of work for “construction phase services” that it requests from  contracted design firms. The responsibilities added to the statement of  work are an effort to utilize and leverage the design firms to provide more  support to OBO’s PDs in the field, enabling the PDs to respond to OBO  contractors more quickly.

Case Studies Contained Examples of Both Adversarial and Cooperative Relationships

Three of our nine case-study projects (involving six contractors) had  adversarial relationships between OBO and three of its contractors. In our  discussions with both OBO and contractor officials, as well as a review of  OBO and contractor documentation, we found that those relationships  were characterized by poor on-site collaboration and claims of delays in  acting on proposed changes that affected project efficiency. In all three  cases, both parties took the position that it was the performance of the  other party when dealing with challenges and changes that most  impacted the project’s progress. The federal contractor performance  evaluations for these projects also reflected the strained relationships  between OBO and the contractors. Two of these situations involved  contractors less experienced with the CSCP. In five of our nine case  studies, OBO PDs and the contractor generally had cooperative  relationships that responded effectively to project issues and resolved  conflicts successfully. Four of these five projects involved the CSCP’s  two long-standing contractors. The third contractor, who reported a  positive contractual relationship with OBO on one of our project case  studies, indicated it had very poor relationship with OBO on its only other  CSCP project. Information on four of our case studies—two that had  more adversarial relationships between State and the contractors and two  that exhibited more cooperative relationships—is included in the text box,  and appendix III contains more information on these projects and our  other five construction case studies.

Example Case-Study Relationships between Overseas Buildings Operations  (OBO) and Its Contractors Bishkek, Kyrgyzstan: A poor working relationship between OBO and the contractor  inhibited resolution of a variety of disagreements. These disagreements included  responsibility for obtaining zoning approvals and building permits with the host  government, and whether the contractor could remove a satellite dish in the  construction zone. Issues regarding timeliness of decision-making by OBO  headquarters and quality of contractor submissions were also raised on this project.

Jeddah, Saudi Arabia: This project was challenged by errors and omissions in the  design provided to the contractor, according to OBO and contractor officials. Both OBO  and the contractor acknowledged that a difficult working relationship slowed efforts to  deal with such challenges. Disagreement also arose regarding timely response to  proposed changes; the contractor maintained that OBO headquarters was delaying  work due to slow decision-making, while OBO maintained that the contractor failed to  mitigate schedule delays for which the contractor was responsible.

The Hague, Netherlands: Both OBO and the contractor said they had a good working  relationship and indicated that OBO’s Project Director and his on-site project architect  enabled OBO to more collaboratively and effectively react to technical inquiries from the  contractor. Both OBO and the contractor noted that the two sides worked cooperatively  to resolve environmental issues and permitting issues raised by the local government.

Kyiv, Ukraine: Both OBO and the contractor observed that each side worked very  cooperatively on-site and at the headquarters level to swiftly accommodate and mitigate  the cost and schedule impact resulting from the addition of an office annex for the U.S.  Agency for International Development.

Partnering Is a Recommended Practice Intended to Foster More Effective Project Collaboration

According to the Federal Facilities Council, facility acquisition traditionally  has been an adversarial environment between facility owners and  construction contractors. The council also indicated conflicting interests  between the parties can result in poor communication, poor problem  solving, and poor results. Further, the council has reported that when  multiple organizations make a commitment to work cooperatively toward  a common objective utilizing teambuilding techniques on building  projects, the practice is called “partnering.”

OBO does not utilize formal partnering, though State’s supplement to the  Federal Acquisition Regulations System acknowledges that partnering  may be used in the context of alternative dispute resolution. According  to the State supplement, this partnering involves an agreement in  principle to share the risks involved in completing a project, and to  establish and promote a partnership environment. It notes that partnering  itself is not a contractual agreement and it does not create any legally  enforceable rights. Instead, partnering seeks to create a new cooperative  attitude in completing government contracts. The three basic steps in  partnering identified by State’s supplement are as follows:  1.  Establish the new relationship through personal contact among the  principals for the government and the contractor before the work  begins.  2.  Prepare a joint statement of goals establishing common objectives in  specific detail for reaching the goals.  3.  Identify specific dispute prevention processes designed to head off  problems, evaluate performance, and promote cooperation.

Both the General Services Administration (GSA) and the U.S. Army  Corps of Engineers call for partnering as a preferred management  process on all major projects as a cooperative approach with their  contractors to resolve problems and reduce conflicts, litigation, and  claims.

For example, GSA recommends formal partnering for all construction  projects developed by its Public Building Services in excess of $10  million in estimated construction costs. One GSA executive official we  spoke with cited partnering as a best practice that can mitigate cost  growth and schedule delays by providing a more collaborative  process to reach fair and equitable decisions faster to the benefit of  both the government and the contractors.

The Corps of Engineers has recommended formal and professionally  facilitated partnering as an integral element on designated “mega  projects,” which generally are those costing in excess of $200 million,  have schedules that exceed 2 years, or have national or international  significance, among other considerations. The Corps of Engineers  reports that partnering is an organized process that can remove  organizational impediments to communication and is consistent with  the government’s implicit duty to act in a fair and reasonable  manner.

Long-Standing CSCP Contractors May Be Better Able to Informally Partner with OBO Than Less Experienced Contractors

As of the end of fiscal year 2017, there were five construction contractors  building new embassies under the CSCP. For the 21 ongoing new  embassy construction projects, 18 (approximately 85 percent) were under  contract with 2 construction contractors who have historically received the  majority (60 percent) of OBO construction contract awards since 1999.  The 3 other projects were each being built by one of the contractors less  experienced with embassy construction. Two of our case studies— Jeddah and Jakarta—included work begun by two earlier contractors that  had been terminated by State, according to OBO officials. Further, the  two long-standing OBO construction contractors were awarded 9 of the  10 new embassy construction projects in fiscal years 2016 and 2017. In  our discussions with OBO officials, they recognized that they have had  persistent challenges in bringing new contractors into the CSCP but retain  an interest in expanding OBO’s contractor pool.

Left unaddressed, some contractors’ frustrations with OBO projects may  be a factor in shrinking State’s contractor pool. Three of the five  contractors we spoke with (all less experienced with embassy  construction) indicated they will not be pursuing future embassy projects  because they believe State has not acted as a fair partner in overseeing  its embassy construction projects. Examples of negative perceptions some of the contractors cited from their perspective included that State  had not been fair in working with the contractors to resolve challenges  such as design-related issues, security-related issues, government- directed changes, or unique issues posed by the countries in which the  projects were located. Contractors said that such issues affected their  and State’s costs and schedules.

OBO officials acknowledged that OBO’s relationships with some  contractors have posed challenges and saw both parties as bearing some  responsibility. They also acknowledged that two long-standing OBO  contractors continue to build most new embassies, and they expressed  an interest in expanding OBO’s contractor pool. We reported similar  collaboration concerns raised by OBO contractors in 2009 when we  examined contractor participation in the embassy construction program  and the decline in the number of contractors participating in the  program. In 2009, 10 of 17 construction contractors rated State as a  poor or fair business partner. Of the 17 construction contractors surveyed  in 2009, 3 had received about 62 percent of OBO’s construction contract  awards from 2001 through 2007. In general, many contractors at that time  told us they were not making as much profit as anticipated and most  contractors also expressed concerns about State’s management of the  program and State’s on-site PDs.

Executive officers from one of OBO’s two long-standing contractors  stated that due to the firm’s experience with CSCP, it is able to carry out  informal partnering with OBO to better address project challenges. This  firm knows OBO’s requirements and processes, as well as who within  OBO headquarters to call to discuss specific issues, if the firm believes  that such issues are not being addressed in a timely manner by the PD or  contracting officer. For example, this long-standing contractor said it was  generally able to overcome a variety of project issues and disagreements  in Pristina, Kosovo, through the firm’s knowledge of, and informal  partnering relationship with, OBO headquarters. The OBO PD and  contractor’s on-site project manager could not reach resolution on the  cost or schedule impacts of a variety of issues including (1) the extent to  which State’s approving the contractor’s local-hired construction workers  was delayed, (2) the timing and responsibility for bringing permanent  power to the site, and (3) the extent to which there were differing site  conditions requiring the contractor to excavate unsuitable soils and  existing foundations.

In January 2018—after our September 2017 site visit to Pristina—this  contractor’s headquarters office was able to resolve some issues with  OBO and State’s Office of Acquisitions that otherwise had not been  resolved by their on-site project manager and OBO’s PD. The firm’s  executive officers stated that contractors with personnel less experienced  with the CSCP—including with OBO and Diplomatic Security  requirements and procedures—do not have this in-depth knowledge and  may experience greater challenges on their first few CSCP projects as a  result. They suggested that OBO should utilize more formal partnering to  bring new contractors into the program. They also cited the need to have  both formal and informal processes for elevating and resolving issues in  order to provide accountability at all levels and ensure that issues are  addressed in a timely manner. The contractor believes that formal  partnering could lessen the learning curve for new firms, reduce the  conflicts between OBO PDs and the contractors’ project managers on- site, and keep more firms in the program.

Formal partnering, particularly with firms that have less experience with  embassy construction, could help avoid adversarial working relationships  between OBO and contractors that inhibit swift resolution of, or even  exacerbate, challenges experienced on already-complex projects. Where  more cooperative project relationships—informal partnering—occurred on  our case-study projects, either on-site between OBO’s PD and the  contractor or between OBO headquarters and the contractor, we found  that this dynamic helped to more easily resolve challenges and facilitate  project efficiency. In discussing the possible use of partnering on OBO  projects, one senior OBO official reported that while OBO utilized formal  partnering to a limited extent on some the CSCP’s early projects— Nairobi, Kenya; Tunis, Tunisia; and Conakry, Guinea—he commented  that he did not think it was very valuable. In his view, it seemed like the  contractors at that time were using the partnering agreement to claim that  OBO was not partnering properly. However, other OBO officials stated  that they understood the practice of partnering by some federal agencies  has evolved since that time. OBO officials agreed that although OBO had  not considered formal partnering recently, it could potentially be useful, particularly if tried on smaller projects with new contractors or those less  experienced with embassy construction. They added that such piloting  would have to be done judiciously to determine how it might best work.  We note that two of those three early projects OBO identified as having  used formal partnering included the current two long-standing contractors  that have completed most of the CSCP embassy projects.

In passing the Secure Embassy Construction and Counterterrorism Act of  1999, one of the congressional findings was that, unless embassy  vulnerabilities are addressed in a sustained and financially realistic  manner, the lives and safety of U.S. employees in diplomatic facilities will  continue to be at risk from further terrorist attacks. State’s CSCP made  steady progress through fiscal year 2017, completing 77 new embassies  and starting construction on 21 more at a cost of just over $24 billion.  However, State will not achieve its 2005 forecast for building 150  embassies by 2018 because progress has been hampered, in part, by  unforeseen building requirements and inflation that were not originally  factored into CSCP funding levels. These issues will affect State’s  progress as it continues to replace embassies that do not meet security  standards. Because State does not currently intend to seek annual  inflationary adjustments for CSCP, although individual projects do  address inflation to some extent, the CSCP’s pace of embassy production  is likely to be reduced over time. As State continues to work with the  Congress to chart the future course, priorities, and funding levels for the  program, regular information on the effects of cost inflation would be  helpful as stakeholders reassess the CSCP program’s funding level from  year to year.

Moreover, State plans to begin the construction of 25 new embassies  within the next 5 years and has identified the need to replace nearly 50  additional embassies in later years. While the CSCP schedule identifies  future embassy replacements, it does not address the projected cost and  time needed to achieve the CSCP’s ultimate critical goal of replacing  embassies that do not meet State’s security standards. Recognizing that  precise estimates cannot be easily made for later years, even a notional  long-term estimate of the CSCP’s overall capital funding investment and  time frames, along with an assessment of risk factors such as inflation,  would strengthen State’s ability to support and sustain its funding needs,  encourage dialogue with congressional committees, and promote  consensus by decision makers in the executive and legislative branches  on funding levels and expectations for program progress.

Additionally, State’s shift to the Excellence approach was predicated on  the idea that customized designs would produce embassy compounds  that are more innovative, functional, and sustainable than those built  using the SED approach, and would also be at least as secure and more  cost efficient to operate. It is too early to tell whether this greater upfront  investment in design will yield cost and schedule benefits during  construction of Excellence embassies or over their life cycle. While past  embassies have generally been completed within expected cost and  schedule allowances, given the number of embassies yet to be built to  meet urgent security needs amid a constrained resource environment, it  remains incumbent upon State to realistically assess its ability under  Excellence to deliver embassies as efficiently as possible. By  comprehensively evaluating its human capital needs against CSCP  priorities and other workload demands, OBO can provide program  stakeholders—including State, OMB, and Congress—the ability to make  fully informed choices as to the capacity of OBO’s design and  construction organization to support embassy production of these  embassies in the near and longer term.

Furthermore, formal partnering could provide OBO with a tool to enhance  collaboration both on-site and between contractors and OBO  headquarters. This could mitigate the unforeseen issues that arise on all  of these challenging overseas projects, but which may be more  complicated to resolve for Excellence projects because each one is  unique. Piloting a partnering program, particularly with newer or less  experienced construction firms could also provide one option to facilitate  State’s long-standing goal of expanding its contractor base.

We are making the following four recommendations to State:  The Secretary of State should determine the estimated effects of cost  inflation on planned CSCP embassy construction capacity and time  frames and update this information for stakeholders on a regular basis,  such as through the annual budgeting process. (Recommendation 1)

The Secretary of State should provide an analysis for stakeholders  identifying those embassies that still need to be replaced to meet State’s  security standards and estimating total CSCP costs and projected time  frames needed to complete those projects. (Recommendation 2)

The Secretary of State should ensure that the Director of OBO conducts  an OBO-wide workforce analysis to assess staffing levels and workload  capacity needed to carry out the full range of OBO’s mission goals, to  include the CSCP. Such an assessment could provide a basis for broader  stakeholder discussion of OBO’s human capital needs and potential  prioritization of activities. (Recommendation 3)

The Secretary of State should ensure that the Director of OBO pilots  formal construction partnering for the CSCP, particularly with construction  firms that are new or less experienced with the program.  (Recommendation 4)

We provided a draft of this report to State for comment. State provided  written comments that are reprinted in appendix IV. In its letter, State  concurred with our four recommendations and described actions planned  to address each of them. In addition, State made several observations,  including that it has moved beyond Excellence to pursue several new  initiatives that aim to lower project and long-term operations and  maintenance costs. We acknowledge the continued evolution of State’s  CSCP. However, our recommendations transcend the pros and cons of  any particular delivery method and will be helpful to State, and  stakeholders, as it works to improve the design and construction of new  embassies. State also provided technical comments on the draft, which  we incorporated as appropriate.

As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees and the Secretary of State. In addition, the  report will be available at no charge on the GAO website at  http://www.gao.gov.

If you or your staff have any questions about this report, please contact  either Brian M. Mazanec at (202) 512-5130 or at mazanecb@gao.gov or  Lori Rectanus at (202) 512-2834 or at rectanusl@gao.gov. Contact points  for our Office of Congressional Relations and Office of Public Affairs can  be found on the last page of this report. GAO staff who made key  contributions to this report are listed in appendix V.

Appendix I: Objectives, Scope, and Methodology

This report examines (1) the pace of the Department of State’s (State)  Capital Security Construction Program (CSCP) in constructing new  embassies, (2) the cost and schedule performance of State’s recent  embassy construction projects, and (3) factors that have affected State’s  ability to deliver construction projects efficiently.

To conduct this review, we obtained information from agency planning,  funding, and reporting documents and interviewed State officials within  the Bureau of Overseas Buildings Operations (OBO); the Bureau of  Diplomatic Security (Diplomatic Security); and the Office of Acquisitions  Management. Within OBO, we spoke with officials from offices  responsible for site acquisition, planning, project development, design  and engineering, cost management, construction management, facility  management, policy and program analysis, and financial management.  We also interviewed officials from construction contractors that have  constructed embassies for State.

To examine the pace of the CSCP, we reviewed OBO project completion  data for projects awarded from fiscal year 1999 (after the two embassy  bombings in Africa) through the end of fiscal year 2017. We then  compared these data against the goals of the program as reported in  State documentation, such as past budget justifications and long-term  planning reports. We also compared completion data against CSCP  funding levels since fiscal year 1999, and further compared those funding  levels with recommendations in the Accountability Review Board reports  from 1999 and 2012 (following terrorist attacks against U.S. facilities). We  also examined OBO’s CSCP schedule outlining embassies planned to  begin construction through fiscal year 2022 and other embassies  identified beyond that time frame. We further consulted GAO’s guide to  leading practices in capital decision-making as well as budget guidance  from the Office of Management and Budget (OMB). We also attempted  to assess CSCP performance in moving U.S. government staff into  secure facilities but found State’s data unreliable for this purpose.

To examine the cost and schedule performance of State’s recent  embassy construction projects, we selected projects awarded from fiscal year 2008 through 2017. We chose fiscal year 2008 because that year  OBO modified its Standard Embassy Design (SED) delivery program to  allow for more bridging design to better tailor the SEDs to specific sites.  This time frame would also capture Excellence-like projects awarded  between the introduction of Excellence in 2011 and the full  implementation of Excellence in 2014, as well as pure Excellence projects  awarded in 2014 and later. Of the embassy construction projects awarded  since fiscal year 2008, we identified 22 completed projects and another  21 underway.

To assess the cost performance of these projects, we used cost data  drawn from the Federal Procurement Data System and back-checked  against OBO-provided contract data, which we found to be sufficiently  reliable for our purposes. We then compared any increases in cost from  the contract value at award to OBO’s general cost contingency for  unforeseen changes on embassy construction projects, which ranges  from 5 to 10 percent. To assess schedule performance, we compared  construction durations from contract documentation with a benchmark of  36 months. We used that benchmark because, in the past, OBO has  maintained that a SED would generally take no more than 36 months to  construct and that construction durations would not be any different under  Excellence. This benchmark was further informed by past GAO  reporting. We did not assess the cost or schedule performance of the 21  projects still ongoing at the end of fiscal year 2017. Because these were  ongoing projects at different stages of construction, we could not  determine whether they would finish within their budget contingency, nor  could we assess their final schedule performance. Furthermore, because  no pure Excellence projects had been completed by the end of fiscal year  2017, we could not compare cost increases or schedule performance of  Excellence projects with SED projects.

To examine factors that have affected State’s ability to deliver  construction projects efficiently, we selected nine construction case  studies out of our universe of projects awarded in fiscal year 2008  through fiscal year 2015, and funded through CSCP. Criteria for  selection included projects with construction contract cost increases,  actual or estimated, of more than 5 percent over the life of the contract  projects, as well as projects whose construction duration exceeded, or  was estimated to exceed, 36 months. We also sought to include as many  different contractors, delivery types (e.g., design-bid-build), and  construction approaches (e.g., Excellence) as possible. Our final nine  construction case studies included projects in Kyiv, Ukraine; Monterrey,  Mexico; Santo Domingo, Dominican Republic; Bishkek, Kyrgyzstan;  Jakarta, Indonesia; Jeddah, Saudi Arabia; The Hague, Netherlands;  Pristina, Kosovo; and Port Moresby, Papua New Guinea. Because many  of OBO’s pure Excellence projects were more recently awarded, we also  reviewed the design contracts for Hyderabad, India, and Beirut, Lebanon.

For each case study, we examined Federal Procurement Data System  data, OBO project data and documentation, as well as official contract  documentation—including modifications that involved changes in cost or  schedule. Additionally, for each of our case studies, OBO compiled  information from its Office of Project Development and Coordination,  Office of Construction Management, Office Cost Management, and Office  of Financial Management into project narratives. Each narrative was then  cleared by project managers, project directors, office directors, and  managing directors of the affected directorates. In general, we attribute  information from these narratives to OBO. We also interviewed relevant  OBO and contractor officials involved with the projects, including on-site  personnel from both completed and ongoing projects. In September 2017,  we conducted fieldwork in Jeddah, Jakarta, The Hague, and Pristina to  observe and discuss construction progress with on-site U.S. embassy  and contractor officials. U.S. embassy officials we spoke with included  those responsible for construction, facilities maintenance, post  management, and security.

To further explore issues arising from our case studies we obtained  information from OBO planning, funding, and staffing documents and also  interviewed State and contractor officials in Washington. We also  reviewed the results of our 2016 survey of OBO staff. Specifically, we  have included narrative responses from that survey commenting on  issues we encountered during our audit work for this report. In some  cases we edited responses for clarity or grammar. Views expressed in the  survey may not be representative of all OBO staff views on given topics.

We conducted this performance audit from April 2017 to September 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

Appendix II: Cost and Schedule Status of Ongoing Embassy Construction Projects as of the End of Fiscal Year 2017

This appendix contains contract values and schedule information for 21  embassy construction projects that were ongoing as of the end of fiscal  year 2017. Table 4 shows contract values for these projects, while figure  13 illustrates schedule information.

Appendix III: Embassy Construction and Design Case-Study Projects

This appendix contains information on selected U.S. Department of State  (State) Bureau of Overseas Buildings Operations (OBO) case-study  projects included in our review. Nine studies focus on the construction  phase of the projects, and two are design case studies. For each case  study, we examined Federal Procurement Data System data, OBO  project data and documentation, as well as official contract  documentation—including modifications that involved changes in cost or  schedule. We also interviewed relevant OBO and contractor officials  involved with the projects, including on-site personnel from both  completed and ongoing projects. For details on our selection of the  projects and our case-study methodology, see appendix I.

For the nine construction case studies, we include timelines showing  dates for notices to proceed, the original estimated completion dates, and  either (a) the actual substantial completion dates (for projects completed  as of end of September 2017) or (b) the scheduled completion date (for  ongoing projects as of the end of September 2017). The start and end  points by which State measures the schedule performance of a project  are, respectively, the date when State issues a notice to proceed and the  date when it issues a notice of substantial completion. During the course  of a project, State may grant schedule extensions for reasons such as (1)  changes (i.e., change orders); (2) government-caused delays (e.g.,  delays in issuing a notice to proceed to the contractor); (3) differing site  conditions than represented in the contract; or (4) excusable delays (e.g.,  for circumstances that could not reasonably be foreseen or avoided).

Similarly, while the value of construction contracts increased for all of the  construction case-study projects we reviewed, State typically reserves a  contingency amount in its project budgets—ranging from 5 to 10 percent  of the contract value at award—to cover unforeseen project changes and  cost increases. OBO’s overall project budgets also include funding for  other nonconstruction costs and contracts, such as planning, design, and  on-site project management and security. We are not reporting overall  project budgets. As of August 2018, the only ongoing case studies that  State reported to us for which they notified Congress of the need to  reprogram funding to cover additional costs were Jakarta and Jeddah.

For each of the following case studies, OBO compiled information from its  Office of Project Development and Coordination, Office of Construction  Management, Office of Cost Management, and Office of Financial  Management into project narratives. Each narrative was then cleared by  project managers, project directors, office directors, and managing  directors of the affected directorates. In our case studies, we generally  attribute information from these narratives to OBO. For contract value at  award and contract value as of the end of fiscal year 2017 we relied upon  data from the Federal Procurement Data System. We used OBO  narratives and project data and documentation as the basis for our  description of the contract delivery type, the date of award, dates of  issuance for notice to proceed and substantial completion, and original  estimated completion date. The discussion in the following case studies  of notable contract actions, such as modifications, requests for equitable  adjustment, and terminations is based upon OBO project narratives and  contract documentation, as well as statements by government and  contractor officials. In some but not all cases, we had relevant contract  documentation available to compare against OBO project data and  documentation or what OBO officials told us.

Table 5 lists the case-study projects described in this appendix, ordered  by the fiscal years in which the construction or design contracts were  awarded.

Construction Case Study: U.S. Embassy in Kyiv, Ukraine Project Overview

State established the U.S. Embassy in Kyiv in 1991 upon the dissolution  of the Soviet Union. According to OBO, State originally redeveloped and  rehabilitated an existing leased facility, built in 1950, to serve as the  chancery office building, while post consular services, public diplomacy  and the Marine security guard quarters were in leased facilities off-site.  OBO reported that while security improvements were made at these  locations over the years, none of these buildings fully satisfied the Secure  Embassy Construction and Counterterrorism Act of 1999 security  standards, such as the 100-foot setback from the street. In September  2008, State purchased a 10-acre site to build a new embassy compound.

A $209.9 million design-build contract for the new embassy was awarded  in September 2008. The project was based on the Standard Embassy  Design (SED). As of September 2017, the contract value was $238.6  million, an increase of $28.7 million or 13.7 percent. According to OBO,  State issued a notice to proceed in March 2009, and the original  estimated completion date was November 2011. Substantial completion  was in September 2011, 2 months early.

Figure 14 shows two views of the new embassy and the timeline for the  original schedule compared with the final schedule.

Contributors to Contract Cost or Schedule Changes

According to OBO, the most significant change to the contract was the  addition of an annex for the U.S. Agency for International Development  (USAID), at a cost of $28 million. OBO reports that State granted the  contractor a 12-month extension for adding the annex; however, the  project was completed 2 months ahead of the original estimated contract  completion date. Both State and contractor officials observed that each  side worked very cooperatively to mitigate cost and schedule effects of  adding the USAID office annex. The other major cost driver was a $4.6  million contract modification to address utility issues. One State official  reported that site utility and below grade infrastructure requirements were  challenging given the cold climate.

Construction Case Study: U.S. Consulate in Monterrey, Mexico

According to OBO, State had occupied the former U.S. consulate in  Monterrey since 1969, and further, the facility did not meet security  standards set by the Secure Embassy Construction and Counterterrorism  Act of 1999. State documented shortcomings with the building’s air  conditioning and electrical systems. OBO documentation indicated the  former site also lacked the space to accommodate staff growth in U.S.  agencies’ offices and the consulate’s functions. OBO reported that  consular demand for services had increased significantly—from 12 to 65  consular windows—and the consulate overall had added desks for 60  U.S. staff and 132 locally engaged staff.

In September 2009, State awarded a $101.9 million design-build contract  for the new consulate based on a bridging design. The bridging design  was based on the standard embassy design. As of September 2017, the  contract value was about $125 million, an increase of $23.1 million or  about 23 percent. According to OBO, State issued the notice to proceed  for the project in April 2010 and the original estimated completion date  was January 2013. Substantial completion occurred in May 2014, 16  months after the original estimated completion date.

Figure 15 shows two views of the new consulate and the timeline for the  original schedule compared with the final schedule.

According to State, the scope of work in the original contract for the  compound included a consulate office building, vehicle maintenance  building, access control facilities, recreational facility, parking structure,  mail screening facility, site perimeter barrier, and associated security  features as well as off-site roadway construction and improvements. OBO  documentation shows the primary cost and schedule increase on the  project was due to the addition of Marine security guard quarters; that  contract modification increased the value of the contract by $16.3 million  and also extended the length of the contract by 337 days. OBO reported  that another contract modification—adding a photovoltaic power system  to the project—increased the contract value by $2.3 million.

Construction Case Study: U.S. Embassy in Santo Domingo, Dominican Republic

According to State, it built the former U.S. embassy in 1950 to  accommodate 75 staff. Prior to the construction of the new embassy, the  U.S. mission comprised 17 U.S. government agencies employing  hundreds of people working in eight office buildings throughout the city.  OBO reported that most of those buildings did not meet security setback  standards that Congress established in 1999 or fire and life safety codes.

According to OBO, in September 2010, State awarded a $148.8 million  design-build contract for the new embassy based on a bridging design.  The project was based on the SED. As of September 2017, the contract  value was about $150.4 million, an increase of about 1 percent.  According to OBO, State issued the notice to proceed for the project in  January 2011 and the original estimated completion date was October  2013. Substantial completion occurred in May 2014, 7 months after the  original estimated completion date. Figure 16 shows an architectural  rendering and photograph of the new embassy office building, along with  the timeline for the original schedule compared with the final schedule.

Five contract modifications totaling about $1.6 million accounted for most  of the cost increase. The largest modification totaled over $600,000,  which OBO told us resulted from a need to increase switchgear capacity.  According to OBO, in the several years since substantial completion, the  contract has not been closed, and unexpended funds remain. As a result,  the final contract value may change. OBO reported that the contractor  had submitted one outstanding request for equitable adjustment for about $450,000. Further, on its side, the U.S. government is withholding around  $7 million for liquidated damages, punch list deficiencies, and warranty  items.

Construction Case Study: U.S. Embassy in Bishkek, Kyrgyzstan

According to OBO, State established the U.S. embassy in Bishkek in  1991 after the dissolution of the Soviet Union. Specifically, a pre- engineered factory-manufactured building was shipped to Bishkek and  assembled on an 11-acre, U.S. government-owned site in 1996. OBO  reported that by 2008, the U.S. diplomatic mission had outgrown the 1996  facility, and in 2009 it became clear that, in addition to new facilities,  significant security upgrades were needed to meet current security  standards.

The new embassy project was to include a chancery (office annex), utility  building, Marine security guard quarters, compound access control  facilities, support buildings (warehouse and shops), and surface parking.  A $116.8 million design-build with bridging contract for the new embassy  was awarded in April 2011. The project was based on the SED. As of  September 2017, the contract value was about $123.3 million, an  increase of $6.5 million, or about 5.6 percent. According to OBO, State  issued the notice to proceed for the project in July 2012, and the original  estimated completion date was December 2014. Substantial completion  occurred in March 2017, 27 months after the original estimated  completion date.

Figure 17 shows the 1996 chancery office building, the new chancery  office building, and the timeline for the original schedule compared with  the final schedule.

A number of factors contributed to increases in contract cost and  schedule for this project. For example, according to OBO, off-site  electrical power upgrades required a $2 million contract modification for  switchgear installation and building a redundant power line to a substation  3 kilometers away from the new embassy compound. OBO also  reported that one contract modification extended the schedule by 37 days  and added $3.4 million to the contract because State temporarily halted  the contractor’s work in some areas of the building due to Bureau of  Diplomatic Security (Diplomatic Security) requirements. According to  State and contractor officials, challenges to the project included (1) a six- phase construction plan to accommodate building on an operational  compound; (2) frequent staff changes (including four on-site OBO project  directors, two OBO construction executives at headquarters, and many  contractor staff changes) and poor relations between OBO and the  contractor; and (3) disagreement regarding OBO and contractor roles and  responsibilities (including, for example, responsibility for obtaining zoning  permits).

Construction Case Study: U.S. Embassy in Jakarta, Indonesia Project Overview

According to OBO, the U.S. government-owned chancery in the  Indonesian government center in Jakarta was built in the 1950s, and its  mechanical, electrical, and plumbing systems are outdated, inefficient,  and expensive to operate. State decided to build a new, secure embassy  on the current embassy site. When completed, the embassy compound  will include a chancery, Marine security guard quarters, support facilities,  preserved historic structures, community facilities, and parking.

A $302 million design-build with bridging contract for the new embassy  was awarded in September 2012. The project was guided by State’s  Excellence in Diplomatic Facilities principles but was awarded before  OBO fully implemented Excellence in 2014. As of September 2017, the  contract value was $339 million, an increase of $37 million, or 12 percent.  According to OBO, State issued a notice to proceed for the project in  December 2012, and the original estimated completion date was  December 2017. OBO reported to us that by September 2017 the  scheduled completion date had been extended to February 2019, 14  months after the original estimated completion date.

Figure 18 shows a model of the embassy compound, the new chancery  office building under construction and the timeline for the original  schedule compared with the schedule as of the end of September 2017.

Before the current construction contract for the new embassy on the  existing embassy compound, State separately contracted for the  construction of temporary office buildings to relocate staff during  construction. According to OBO, the work on the temporary office  buildings fell behind the contracted schedule and would not be completed  before the new embassy contractor’s arrival on-site. Consequently, State  terminated the first contract for temporary buildings and awarded the  remaining work to the current contractor.

OBO encountered significant challenges due to its decision to employ a  glass curtain-wall system for the new embassy’s chancery office  building. OBO project documentation shows the use of the customized  glass exterior wall designed for the embassy significantly impacted cost  and schedule after contract award, adding at least $18 million to the cost  and 180 days to the schedule. OBO’s decision to employ a unique glass  curtain-wall system for this project and subsequent questions raised by  Diplomatic Security about the design led OBO to modify the contract to  add (1) $2.2 million and 180 days to explore alternative designs and  conduct redesign work in order to obtain Diplomatic Security approval, (2)  $13.3 million so that a dedicated facility could be established in the United  States to securely fabricate the glass curtain wall before secure shipment  to the site, and (3) $3 million to have cleared American workers install  portions of the glass curtain wall. OBO had not previously employed  such a system in a completed embassy project and could not provide us  with documentation analyzing the risks of such a feature to cost and  schedule—which might have included potential delays to get Diplomatic  Security’s approval of the design—compared with conventional concrete  construction.

As of the end of September 2017, OBO reported that State and the  contractor had agreed to extend substantial completion to February 2019  after settling the contractor’s request for equitable adjustment, which had  claimed that five events delayed construction: (1) the late turnover of  unimpeded access to the early site work; (2) the redesign of compound  access facilities; (3) the redesign of portions of controlled areas of the  building; (4) additional time for the certification of security requirements,  specifically related to the curtain-wall system; and (5) design changes to  the curtain-wall system itself.

Post officials also expressed concerns that this new embassy compound  was originally planned to accommodate only the U.S. embassy to  Indonesia. Subsequently, State opened a permanent mission to the  Association of Southeast Asian Nations in Jakarta to be collocated within  the new embassy. Because of this and other staff growth, U.S. embassy  officials told us that the new embassy will have little to no room for future  growth.

Construction Case Study: U.S. Consulate in Jeddah, Saudi Arabia

According to OBO, the current consulate built in 1952 served as the  chancery before the U.S. embassy moved to Riyadh in 1984. In 2004 an  attack on the consulate resulted in the deaths of five employees and  wounded many more. The new Jeddah compound will include a  consulate office building, staff housing, ambassador’s residence, consul  general’s residence, Marine security guard quarters, and various  supporting facilities.

OBO reported that construction of the new consulate started under a  design-build contract awarded in 2007, but the construction contractor  was terminated-for-default in 2012, leaving State with a partially built  project. In September 2012 State awarded a $100.5 million construction  contract for the new compound to a second contractor. The project was  based on the SED. As of September 2017, that second contract value  was $131.3 million, an increase of $30.8 million, or 30.6 percent.  According to OBO, State provided notice to proceed in October 2013 and  the estimated completion date was October 2015. According to State  documentation, this completion date was subsequently extended to  February 2017. State and contractor officials told us that, at the end of  September 2017, a modification was pending that would further extend  the schedule to January 2018, 27 months after the original estimated  completion date.

Figure 19 shows the existing consulate, the new consulate office building  under construction, and the timeline for the original schedule compared  with the schedule as of the end of September 2017.

According to OBO, State hired a design firm—previously a subcontractor  of the first construction contractor—to finish the design so that contract  bids could be solicited from new contractors to complete the project. In  doing so, State effectively changed the project delivery method from  design-build to design-bid-build, whereby it directly contracted the design  firm to finish the construction documents and then contracted a  construction firm to build the project.

Both State and contractor officials reported to us that this project was  consistently challenged by design errors and omissions. According to  OBO, approximately $14 million of the nearly $31 million cost increase— and 131 calendar days—were due to issues with this project’s design.

According to State and contractor officials, the project was generally  completed in March of 2017, which both sides termed “virtually  substantially complete.” However, they stated that significant issues with  the consulate building’s cooling and fire suppression systems effectively  prevented OBO from contractually accepting the project as complete and  allowing consulate staff to move in. As of September 2017, State and the  contractor could not provide a firm date for when they expected consulate  staff to be able to occupy the new compound.

Both OBO and contractor officials acknowledged that a difficult working  relationship slowed efforts to deal with project challenges. For example,  they stated the project had at least four different OBO project directors.  One OBO official characterized the collaboration on the project by State,  the contractor, and State’s designer as “having a lot of conflicts” and said  that as problems with the project arose during construction, all parties  “dug their heels in.” In September 2017, one official indicated the then  temporary Project Director had improved the working relationship with  post and the contractor and was doing his best to work through the  current issues and delay. Disagreement also arose regarding timely  response to proposed changes; the contractor maintained that OBO  headquarters was delaying work due to slow decision-making, while OBO  maintained that the contractor’s proposals did not meet requirements.

The functionality of the completed compound may also be affected by  several issues. According to post officials, after the February 2015  closure of the U.S. Embassy in Yemen, State relocated some of those  staff to Jeddah, requiring the conversion of five newly built apartments  into office space. Post officials also reported that the original plan for the  staff apartments was predicated on the post remaining an  unaccompanied duty assignment whereby U.S. staff may not bring family  members. Those officials expressed concern that space would become  limited because family members are now allowed to accompany Foreign  Service Officers to Jeddah. An additional concern was that the consulate  was originally intended to provide consular services only for U.S. citizens  but was now authorized to issue nonimmigrant visas for Saudis seeking  to travel to the United States, which post officials predicted would  increase consular traffic flow beyond the new building’s intended volume.

Construction Case Study: U.S. Embassy in The Hague, Netherlands

According to OBO, the previous U.S. embassy in The Hague was located  on a downtown square opposite the Netherlands Parliament. Completed  in 1959, the chancery sat directly adjacent to a major road and sidewalks  and did not meet State security standards set by the Secure Embassy  Construction and Counterterrorism Act of 1999.

The new embassy compound is located within the municipality of  Wassenaar, adjacent to The Hague. The compound includes a chancery  office building, Marine security guard quarters, support buildings, and  parking. According to OBO, the design phase included a lengthy site  planning, landscape design, and architectural design period due to local  ordinances and stringent permitting requirements. OBO reported that  this design contract was awarded in November 2012, and the design was  completed in July 2013. The project delivery method was design-bid- build.

A $125 million construction contract for the new embassy was awarded in  September 2013. As of September 2017, that contract value was $131.7  million, an increase of about $6.7 million, or approximately 5 percent.  According to OBO, State issued a notice to proceed for the project in  June 2014, and the estimated completion date was June 2017. In  September 2017, OBO reported that it and the contractor had extended  the contract completion date to July 2017. In addition, as of September  2017, OBO and the contractor were negotiating over further cost and  schedule changes.

Figure 20 shows a historical photo of the 1959 embassy, the new  embassy under construction, and a timeline showing the original schedule  compared with the schedule as of the end of September 2017.

According to OBO, the official permit for construction was received in  August 2013, with an effective date of September 2013. However, the  permit was issued with a number of conditions that OBO reported took  approximately 9 months for State to resolve and resulted in a delay of full  notice to proceed until June 2014. Both OBO and the contractor said  that the two sides worked cooperatively to resolve permitting issues  raised by the local government. Based on OBO reporting, these issues  contributed, in part, to over $1 million in cost modifications on the  contract. Further, technical omissions that were not discovered during  design review resulted in changes to sprinklers, fire alarms, security  window treatments, and classified data interconnections. According to  OBO, these late changes resulted in further requests for time extensions  from the contractor.

In addition, according to OBO, State did not plan for the colocation of one  tenant agency onto the compound (8 people) and a second tenant  agency increased its staffing by approximately 40 percent (19 people).  Because of those staffing changes, post officials reported that there is no  additional space for future growth in the new compound.

Construction Case Study: U.S. Embassy in Pristina, Kosovo Project Overview

According to OBO, State established this post in 1999 as a U.S. liaison  office during the military intervention in Kosovo by North Atlantic Treaty  Organization forces. When the U.S. government opened the post, OBO  reported that it assembled a number of contiguous residential properties  under short-term leases and closed the adjacent streets. State  designated the post as an embassy in 2008. Figure 21 shows some of the  existing houses that State converted for use as the embassy.

In September 2014, State awarded a $158.4 million design-build contract  for the new embassy under a bridging design. The new embassy is one  of the first projects fully designed and constructed under the Excellence  approach. As of September 2017, that contract value was $159.6 million,  an increase of less than 1 percent. According to OBO, State issued a  notice to proceed for the project in December 2014, and the original  estimated completion date was October 2017. As of September 2017,  completion was scheduled for January 2018, 3 months after the original  estimated completion date).

Figure 22 shows an architectural rendering of the new embassy, a photo  of it under construction, and a timeline for the original schedule compared  with the schedule as of the end of September 2017.

According to OBO, the largest change in cost resulted from State adding  additional security cameras to improve monitoring of the compound and  its facilities. In a separate change, OBO also granted the contractor a  schedule extension of 98 days to account for changes in security  requirements at project startup and funds to include adjustments made by  State to the locations of the recreation facility, pool, and other items  relative to the perimeter security wall.

As of September 2017 in our interviews with them, the OBO Project  Director and contractor’s on-site Project Manager could not reach  resolution on the cost or schedule impacts of a variety of issues. These  included (1) the delay in State’s approving the contractor’s locally hired  construction workers, (2) the timing of and responsibility for bringing  permanent power to the site, and (3) site condition issues related to  unsuitable soils and existing foundations.

Construction Case Study: U.S. Embassy in Port Moresby, Papua New Guinea

According to OBO, the current U.S. embassy is housed in a building  constructed in 1970 in Port Moresby’s business district. The lease will  expire in September 2020. Furthermore, the facility is overcrowded,  functionally deficient, and does not meet the latest security standards.

Also according to OBO, in 2009 the U.S. government acquired a 7.26- acre site for a new embassy compound through a long-term lease from  the government of Papua New Guinea. State planned for the new  embassy to be a standard secure mini-compound and awarded a  construction contract in late 2011 with an estimated completion date in  mid-2014. However, according to a State official, because the embassy  requirements changed, State decided to terminate the contract for the  convenience of the government.

The project delivery method is design-bid-build. A $95 million  construction contract for the new embassy was awarded in September  2015. As of September 2017, that contract value was $102.5 million, an  increase of $7.5 million, or about 8 percent. According to OBO, State  issued the notice to proceed for the project in March 2017, after a delay of  about a year due to another prospective contractor disputing the contract  award. As of September 2017, the estimated completion date remained  unchanged at September 2019.

Figure 23 shows an architectural rendering of the new embassy, an aerial  view of the embassy under construction, and the timeline for the schedule  as of the end of September 2017.

Contributors to Contract Cost and Schedule Changes

According to OBO, in 2013, after the initial contractor had completed  approximately 40 percent of the project, State changed the project scope:  (1) Staffing was increased from 47 desks to 77 desks, which could not be  accommodated in the standard secure mini-compound; (2) classified  information processing was added as a new requirement; and (3) a  Marine security guard detachment was assigned to post, requiring the  addition of a residence for them. Due to these new requirements,  according to a State official, State decided to terminate the contract for  the convenience of the government.

According to OBO, the embassy compound was redesigned under a  design contract to accommodate the new project scope. The redesign  contract lasted 14 months, from April 2014 to June 2015. OBO reported  that when the first contractor stopped work on the standard secure mini- compound, the concrete structures for all buildings on the compound had  been completed. The new design, finished in June 2015, added a four- story office tower next to the existing chancery structure, with additional  general work areas, and new controlled access areas. The redesigned  site also added a nine-bed Marine security guard quarters, enlarged the  building for the warehouse and shops, and added upgraded community  facilities. According to OBO, further cost increases could accrue because  of damage to government-provided equipment left by the first contractor,  which may need to be re-purchased.

Design Case Study: U.S. Embassy in Beirut, Lebanon Project Overview

According to OBO, the embassy currently operates out of a nearly 18- acre compound in East Beirut consisting of a mixture of office and  residential facilities that are both government-owned and leased.  According to State, this site is severely cramped and does not meet  current security standards.

The new embassy site consists of just over 44 acres situated on a steep  hilltop area near the existing U.S. embassy. State typically seeks to build  new embassy compounds on 10 acres of land. OBO noted to us the new  compound will include a chancery office building, staff residences,  support buildings such as a warehouse and recreation facility, and Marine  security guard quarters. Figure 24 shows architectural renderings of the  new embassy.

The design contract for this design-bid-build project was awarded in  September 2014 for $39.6 million. Project documentation indicates the  design process included the development of three initial concepts, which  were reviewed by OBO’s Industry Advisory Group and OBO senior  management. OBO reported a single design concept was selected in  January 2015 for further development. The design firm then developed a  schematic design (less than 35 percent design) that OBO indicated was  approved by the OBO Director in March 2015.

The design proceeded through design development (35 percent) and  construction document development (60 percent and 90 percent); OBO  reported to us the final construction documents were completed in April  2016. Following completion of the 100 percent design and subsequent  contract solicitation activities, in December 2016 State awarded a $613.3  million construction contract to build the new embassy. As of September  2017, a notice to proceed for construction had just been issued.

Contributors to Design Contract Cost Changes

OBO reported that the 100 percent design was completed in April 2016  (19 months after contract award). OBO reports that final design cost by  itself was $45.3 million, amounting to a $5.7 million, or about 14.5  percent, increase over the original design contract value. OBO  documentation shows the increase in the cost for the project’s design  was, in part, attributed to added design for temporary construction  support facilities—to include both temporary office space and 40 secure  housing units—that would be needed on-site by State’s project  management team during the construction. However, the total contract  cost as of the end of fiscal year 2017 was $58 million, about 46.5 percent  more than the original contract value. This larger value includes  approximately $13 million primarily for “Title II, construction phase  services.” Through these services, the design firm provides technical  support to OBO during construction to answer the construction  contractor’s questions about the design and generally to support OBO’s  review of the construction contractor’s material samples, drawings,  building systems and product data, test and inspection reports, and any  design changes or substitutions.

State’s estimated construction costs increased during the project’s design  from approximately $500 million to over $660 million due to what OBO  reports were challenging site conditions that required the extensive use of  retaining walls and engineered foundation systems. Additional perimeter  security in the form of guard towers was also added. OBO indicated these  scope changes required additional design and increased the construction  cost estimate.

Design Case Study: U.S. Consulate, in Hyderabad, India Project Overview

Established in 2009, the U.S. consulate general in Hyderabad is the first  new U.S. diplomatic post to open in India since India’s independence in  1947. According to OBO, in 2007 the U.S. government leased the current  4-acre consulate property—that was once used as a palace—for use as  an interim consulate location. OBO indicated the new consulate will be  built on a 12.3-acre site located in Hyderabad’s financial and high-tech  districts. Further, the new compound will include a consulate office  building, three compound access facilities, a support annex to include a  warehouse, a recreation facility, and Marine security guard quarters.  Figure 25 shows the existing interim consulate and an architectural  rendering of the new consulate.

State issued a task order for the design of the project in September 2014  with the intent that the project would be a design-bid-build project and that  the design firm OBO tasked would prepare a 100 percent design. OBO  indicted the construction contract for the project was planned to be  awarded in fiscal year 2017. However, after beginning initial design,  OBO determined that changing the delivery method from design-bid-build  to design-build with bridging would allow for an earlier construction  contract award in fiscal year 2016.

With this change in the project delivery method, the design task order was  modified such that OBO’s design firm would provide bridging  documents—roughly a 35 percent design—rather than a 100 percent  design. The bridging documents would then be used by the design-build  construction contractor to complete the design and construct the project.  The design firm that had been tasked by OBO to prepare the bridging  documents would also (1) review and process design submittals from the  design-build contractor, (2) answer any request for information about the  bridging design intent, and (3) ensure the design intent represented by  the bridging design was maintained throughout design development by  the design-build contractor.

Contributors to Design Contract Cost or Schedule Changes

According to OBO, the bridging design was completed in April 2016 (19  months after the initial contract task order). As noted earlier in this  report, OBO project documentation shows the initial design of the  building’s unique exterior screen concerned OBO management, leading  to more design development by the contract architect, further review by  OBO’s design staff, and added cost. OBO senior management expressed  concerns about the look of the screen, mainly that the screen was too  traditional compared with the spirit of the design of the building and the  rest of the campus and that the pattern of the screen needed more  variation for daylight and views.

To respond to these concerns, OBO issued two contract modifications to  OBO’s architect for additional design work for the exterior screen.  According to OBO, subsequent design development for three alternatives  for the screen contributed an additional design cost of about $750,000,  raising the final bridging design cost to approximately $10.5 million. That  amount does not include the roughly $816,000 for the design firm to  provide additional support services during construction, of which OBO  reports a minor portion is attributable to ensuring the construction  contractor achieved the design intent for the exterior screen. According to  OBO data, the design-build contract to complete the design and build the  project was awarded in September 2016 at a value of $203 million. OBO  also reported the design-build contractor received full notice to proceed  with construction in March 2017. As of the end of September 2017, the  project was still under construction.

Appendix IV: Comments from the U.S. Department of State

Appendix V: GAO Contacts and Staff Acknowledgments

Brian M. Mazanec, (202) 512-5130 or mazanecb@gao.gov.  Lori Rectanus, (202) 512-2834 or rectanusl@gao.gov.

In addition to the contacts named above, Leslie Holen (Assistant  Director), Michael Armes (Assistant Director), David Hancock, John  Bauckman, and Eugene Beye, made key contributions to this report.  David Dayton, Justin Fisher, Alex Welsh, and Neil Doherty provided  technical assistance.

Responding to two 1998 terrorist bombings of U.S. embassies, the State Department embarked on a program to construct more secure embassies. While it had completed 77 as of September 2017, State won't reach its goal of 180 new embassies by 2018.

Unexpected requirements—such as adding office annexes—and not accounting for inflation have contributed to slowing project delivery. With over 20 embassies under construction and 72 planned, State faces staffing shortages and strained contractor relationships.

We made recommendations to State to plan for inflation, analyze funding and workforce needs, and seek improved contractor relationships.