Audit of Selected Contractor Requests for Equitable Adjustment Related to Bureau of Overseas Buildings Operations’ Construction Projects

OIG recommends that the Bureau of Administration, in coordination with the Bureau of Overseas Buildings Operations, update the Foreign Affairs Handbook (14 FAH-2 H-535) to include guidance on how to avoid improper technical direction that could initiate a constructive change for construction contracts. At a minimum, the update should include guidance on reviewing requests for information and other methods of communication to contractors.

OIG recommends that the Bureau of Overseas Buildings Operations (OBO), in coordination with the Bureau of Administration, develop and implement a process for management to review and monitor documents referenced in contractor requests for equitable adjustment, such as requests for information and requests for design clarification, to identify improper technical direction initiated by Project Directors or other OBO personnel.

OIG recommends that the Bureau of Overseas Buildings Operations (OBO) develop and communicate a Construction Alert to remind Project Directors and Construction Executives to review and follow the guidelines and steps developed in OBO's Construction Management Guidebook pertaining to requests for equitable adjustment, including documenting contract references and providing backup documentation to link changes to the contract.

OIG recommends that the Bureau of Administration develop, implement, and communicate policies and procedures directing Contracting Officers to obtain from the responsible Project Director all required documentation related to requests for equitable adjustment for construction contracts and to document their review of all findings of fact, written request for equitable adjustment analyses, and prenegotiation memoranda provided by Project Directors to assist Contracting Officers in making merit determinations.

OIG recommends that the Bureau of Overseas Buildings Operations, in coordination with the Bureau of Administration, develop, implement, and communicate a process for Project Directors and Contracting Officers to evaluate all cost elements submitted by contractors to determine necessity, reasonableness, and allowability. Additionally, the process should require that cost element evaluations be included in the independent government cost estimate and prenegotiation memoranda.

Once Recommendation 10 has been implemented, OIG recommends that the Bureau of Overseas Buildings Operations (OBO), in coordination with the Bureau of Administration, develop and implement training for OBO staff and Contracting Officers on the policies and procedures related to cost principles.

OIG recommends that the Bureau of Administration, in coordination with the Bureau of Overseas Buildings Operations, take the following actions: (1) determine whether the questioned costs of $80,113, which were considered unsupported, for three requests for equitable adjustment for the New Embassy Compound Asuncion, Paraguay, construction contract (SAQMMA17C0082) were supported and (2) recover any costs determined to be unsupported, as shown in Table B.1.

OIG recommends that the Bureau of Administration, in coordination with the Bureau of Overseas Buildings Operations (OBO), take the following actions: (1) determine whether the questioned costs of $25,663, which were considered unsupported, for six requests for equitable adjustment for the New Embassy Compound Tegucigalpa, Honduras, construction contract (19AQMM19C0223) were supported and (2) recover any costs determined to be unsupported, as shown in Table B.3.

OIG recommends that the Bureau of Administration, in coordination with the Bureau of Overseas Buildings Operations, take the following actions: (1) determine whether the questioned costs of $173,720, which were considered unallowable, for six requests for equitable adjustment for the New Embassy Compound Tegucigalpa, Honduras, construction contract (19AQMM19C0223) were allowable and (2) recover any costs determined to be unallowable, as shown in Table B.5.

OIG recommends that the Bureau of Administration, in coordination with the Bureau of Overseas Buildings Operations, (1) review all contract modifications for the New Embassy Compound Beirut, Lebanon, construction contract (SAQMMA17C0079) to identify all costs associated with violations of the cost principle requirements in Federal Acquisition Regulation 31.203, which govern the selection of a distribution base for allocating indirect costs, and (2) recover any costs determined to be unallowable.