Through a combination of permanent and temporary measures, the Corps  planned to restore the level of hurricane protection to the New Orleans  area that existed prior to Hurricane Katrina by June 1, 2006. 2). 3). Commitment to Meet Schedule Drove Specifications but Resulted in Deficiencies in Some Key Contract Terms

The Corps’ efforts to develop the specifications for the pumping systems  were driven by its commitment to have as much pumping capacity as  possible in place at the drainage canals by June 1, 2006—the start of the  first Atlantic hurricane season after Hurricane Katrina. Specifically, the original factory test requirements were ambiguous, there  were limited provisions for on-site testing, and there were no criteria for  acceptance of the pumping systems by the government. The Corps Used a Streamlined Solicitation Process and Awarded the Pumping Systems Contract to the Highest-Rated Competitor

Given the need to procure and install the temporary pumping systems  before the June 1 start of the 2006 hurricane season, the Corps decided to  use a streamlined process to contract for the pumping systems. The Corps and the Contractors Have Addressed Pumping System Testing and Performance Issues

The Corps and its contractors have addressed and corrected the pumping  system testing and performance issues identified by both our May 2007  report and the ITR. Beginning in  June 2006, however, even though all of the problems identified during  factory testing had not been resolved, the systems were installed as  planned because the Corps believed it was better to have some pumping  capacity along the drainage canals during the 2006 hurricane season rather  than none. Pumping System Performance Issues Have Been Addressed by the Corps and the Contractors

The Corps and the contractors have addressed and corrected the concerns  raised about some components of the pumping systems during factory and  on-site testing. As noted in our May 2007 report and in the ITR, the primary  concerns identified during testing included undersized gear oil circulation  motors, hydraulic motor vibrations, the design of the hydraulic intake line,  suspect pipe welds, and lower than expected pumping capacity. After installation, the Corps  and its contractors took several steps to correct known performance  issues with the pumping systems. In addition, as of September 2007, each  pumping system had been successfully tested on site for at least 2 hours,  providing greater assurance that they will perform as designed during  future hurricane seasons. Contract Files Remained Incomplete for Months, but Currently Contain Required Documentation for the Type and Value of Procurement

Contract files for the pumping systems, although incomplete at the time of  the ITR review, now contain the required documentation for the type of  contract and the value of the associated modifications. In a number of  cases, however, Corps officials inserted required documentation in the  contract files several months after modifications were issued and only  after the ITR reported its findings. While the ITR correctly noted the  absence of some forms of required documentation, we found that much of  the documentation specifically cited—including requests for proposals,  independent government estimates, certified cost or pricing data, technical  analyses, and price negotiation memorandums—was not required for the  modifications in question. In addition, while the ITR found that it appeared  as though the contractor developed the scope of work and pricing for  some of the modifications without a subsequent analysis by the Corps, we  found no instance of this occurring. The Corps Has Not Overpaid the Contract and Has Plans to Reconcile Payments Made in Error

As of October 31, 2007, the Corps had paid the contractor about $30.5  million of the $33 million contract for the 40 hydraulic pumping systems  and has plans for reconciling mistaken payments it made. Our review found no other instances  where duplicate payments were made to the contractor. According to Corps officials,  the final payment and reconciliation of the contract, including any  incentive payments or penalties, will be settled with the contractor after  final acceptance of the pumping systems.
Why GAO Did This Study

Hurricane Katrina caused several breaches in the floodwalls along three drainage canals in New Orleans, contributing to catastrophic flooding. To restore the pre-Katrina level of hurricane-related flood protection, the Army Corps of Engineers (Corps) decided to acquire several large-capacity pumping systems. During the process of acquiring, testing, and installing the pumping systems, issues with the pump contract and operation of the pumping systems came to light, including several identified in a Corps Independent Team Report (ITR). GAO was asked to evaluate the Corps' efforts to (1) develop contract specifications and award the contract, (2) address pumping system performance issues, (3) document contract modifications, and (4) reconcile contract payments. GAO reviewed contract and testing documents, observed the operation of the pumping system, and interviewed officials from the Corps, its consultants and contractors, and the ITR team.

What GAO Found

Schedule concerns drove the Corps' decisions in developing specifications for the pumping systems and awarding the contract, but the rush to award the contract resulted in deficiencies in key contract provisions. Specifically, the original factory test requirements were ambiguous, there were only limited provisions for on-site testing, and there were no criteria for acceptance of the pumping systems by the government. The Corps conducted an expedited competition to contract for the pumping systems and selected a supplier for contract award based largely on its ability to deliver the pumping systems by the June 1 start of the 2006 Atlantic hurricane season. The Corps and the contractors have addressed and corrected known performance issues with the pumping systems. Concerns included hydraulic motor vibrations, the design of the hydraulic intake line, suspect pipe welds, and lower than expected pumping capacity. The pumping systems were installed prior to correcting these issues because the Corps believed it was better to have some pumping capacity along the drainage canals during the 2006 hurricane season rather than none, despite uncertainty over how much of the pumping system capacity would be available, and for how long, if needed. Between November 2006 and September 2007, the Corps and the contractors completed all of the repairs and reinstalled the pumping systems. Documents that GAO reviewed indicate that, as of September 2007, each pumping system had been successfully tested on site for at least 2 hours, thus providing greater assurance that they will perform as designed. The contract files for the pumping systems contained the required documentation for the type and value of the contract and associated modifications, though, in a number of cases, documentation was inserted in the contract files several months after modifications were issued and only after the ITR reported its findings. While the ITR correctly noted the absence of some required documentation, GAO found that much of the specific documentation cited as missing was not required for the modifications in question because of the nature and value of these modifications. In addition, while the ITR found that it appeared as though the contractor developed the scope of work and pricing for some of the modifications without a subsequent analysis by the Corps, GAO found no instance of this occurring. As of October 31, 2007, the Corps had paid the contractor about $30.5 million of the $33 million contract amount. In a few instances, the Corps made duplicate payments to the contractor. GAO found that these payments were due to Corps mistakes, not inappropriate billing by the contractor. GAO found no other cases of duplicate payments. The Corps plans to adjust for the duplicate payments by deducting the balance from remaining funds, including any incentive payments, owed to the contractor. According to Corps officials, final payment and reconciliation of the contract is expected by early 2008; however, it is unknown to what extent contract or pump performance issues will affect the final amount paid for the contract during the close-out process.