Army Corps of Engineers and GSA Faulted for Costly Contract Changes

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Agencies aren’t tracking company timeframes in monitoring $36 billion in construction spending, watchdog finds.

With government-commissioned construction projects a perennial source of cost overruns, the Army Corps of Engineers and the General Services Administration could both improve their tracking of change orders given to contractors executing the government’s $36 billion spend for new facilities in fiscal 2018.

That’s the verdict from the Government Accountability Office’s July 2 report, which reviewed data from August 2018 to the present. While the Corps of Engineers “can compile and review construction contract change information on an ad hoc basis, the agency does not conduct regular monitoring at the headquarters level and must manually manipulate data to review this information,” auditors noted. “GSA lacks information on the contract change process and its time frames at the headquarters, regional and local levels.”

The lapses, GAO said, mean that “contracting officials may be unable to spot potential problems—such as long process times that may affect project schedules—as they occur and respond accordingly.”

Agencies are required under the fiscal 2019 National Defense Authorization Act to report information on how quickly they finalize contract changes authorized by contracting officers, who either impose or negotiate them. The contractors, nearly half of them small businesses, have complained about delays in processing change orders, which can alter price and profitability.

According to interviews with private-sector construction managers and testimony before the House Small Business Committee, the report noted, the change process “negatively affects cash flows, increases administrative and legal costs, and creates a risk of not receiving reimbursement for completed work.”

Agencies, for their part, note that preparing cost estimates for negotiations with awardees “can be time-consuming, particularly for complex changes. Yet the time may be used to help ensure the government has adequate cost data to inform negotiation,” the report said. In addition, “miscommunication during the contract change process—which can lead to problems such as unauthorized work undertaken by the contractor—can result in additional reviews and longer time frames.” (The Corps of Engineers says most are finalized within 60 days.)

A centralized data collection process on contract changes “can help agencies understand the scope of any problems encountered,” GAO stated, noting that new legislative requirements give agencies an August 2019 deadline for compiling more-detailed data on contract changes. Neither agency has a modernized strategy for promptly processing and tracking contract changes, which are still calculated and documented manually.

The small business offices within the Army Corps and GSA told auditors they play only a limited role in monitoring construction contract changes.

GAO recommended that GSA’s Public Buildings Service and the Army Corps each develop a strategy to “routinely collect information on and monitor time frames for changes” in construction projects at the headquarters level.

Both agencies agreed.

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