1). According to these reports, the Corps awarded 21 new  continuing contracts during this time: 9 for construction and 12 for  operations and maintenance, ranging in value from $2.1 million to $341.5  million, for a total of about $811 million. However, we found that some  continuing contracts were double-counted, while others were omitted  from the reports. We also  identified other types of errors that did not affect the overall totals of new  contracts or their value but, nevertheless, raise questions about the  accuracy of the information that the Corps is providing to Congress. Similarly, we found that two fully funded contracts  were incorrectly included in the 2007 quarterly reports as existing  continuing contracts. Although the Corps  concurred at the time, Corps officials told us that the agency had not  developed a tracking system as we had recommended because it believed  its system of asking divisions to provide information on a quarterly basis  was sufficient for tracking the use of continuing contracts. While these changes, taken together, have resulted in a decrease  in the number of continuing contracts that the Corps has awarded, they  have not significantly affected the agency’s ability to execute its Civil  Works program. These  officials did not provide any examples, however, of where work on a  project was stopped because funds were not available. The Corps Did Not Comply with a Legal Requirement in Implementing the New Continuing Contracts Clause

In implementing the new continuing contracts clause, the Corps did not  comply with a legal requirement and, as a result, some districts are  reluctant to use it when awarding contracts. Specifically, the Corps has  been using the new continuing contracts clause prior to its publication in  the Federal Register for public comment, in violation of section 22 of the  Office of Federal Procurement Policy Act (OFPP Act), 41 U.S.C.§ 418b. This section of the act generally provides that no procurement regulation  relating to the expenditure of appropriated funds that has a significant  effect beyond the internal operating procedures of the agency or a  significant cost or administrative impact on contractors or offerors may  take effect until 60 days after the procurement regulation is published for  public comment in the Federal Register. This requirement for advance  comment may be waived if urgent and compelling circumstances make  compliance impracticable; in such cases, a procurement regulation shall  be effective on a temporary basis if a notice of the regulation is published  in the Federal Register stating that it is temporary and providing for a  public comment period of 30 days. According to these  officials, because this legal requirement has not been met, they are  concerned that using the new clause could subject the Corps to legal  challenges such as bid protests. Such potential legal challenges could  prolong projects and increase their costs. Recommendations for Executive Action

To ensure that the Corps provides accurate and reliable reports to  Congress on its use of continuing contracts and complies with federal  procurement law, we recommend that the Secretary of Defense direct the  Chief of Engineers and Commanding General of the U.S. Army Corps of  Engineers to take the following three actions:    Establish adequate internal controls to ensure accurate and complete  information is collected and reported to Congress on the use of continuing  contracts. More specifically, from 1922 to 2005, the Corps had the  authority to award multiyear contracts (called continuing contracts)  without having received appropriations to cover the full contract amount. For the  purpose of this review, we have referred to the special clause as the “new  clause.”
To determine the accuracy of the information the Corps reported to  Congress in fiscal years 2007 and 2008, we compared information from the  Corps’ quarterly reports on the number, type, and dollar value of  continuing contracts that used the new clause with information obtained  from a Corps database and results of interviews with Corps officials in  selected divisions and districts. To obtain information about the extent to which the Corps’ use of  continuing contracts with the new clause may have affected its execution  of the Civil Works program and the extent of the Corps’ use of continuing  contracts with the new clause, we interviewed Corps division and district  officials at the locations identified above, as well as at Corps headquarters.
Why GAO Did This Study

The U.S. Army Corps of Engineers (Corps) has had the authority to award multiyear contracts--continuing contracts--without having received appropriations to cover the full contract amount. In 2006, Congress limited the Corps' use of such contracts by prohibiting obligations made in advance of appropriations. In response, the Corps developed a new clause that stopped work once funding for a fiscal year was expended. GAO was mandated to examine (1) the accuracy of the Corps' fiscal years 2007 and 2008 quarterly reports to Congress about continuing contracts that included the new clause, (2) the extent to which the Corps' use of continuing contacts with the new clause may have affected its execution of the Civil Works program during this time, and (3) the extent to which the Corps followed legal procedures in implementing the new clause. To conduct this work, GAO reviewed Corps documents, such as its quarterly reports and bid protests, federal procurement laws, and interviewed officials.

What GAO Found

The Corps' quarterly reports to Congress for fiscal years 2007 and 2008 about continuing contracts with the new clause were inaccurate. According to the reports, the Corps awarded 21 new continuing contracts during fiscal years 2007 to 2008: 9 for construction and 12 for operations and maintenance, ranging in value from $2.1 million to $341.5 million, for a total value of about $811 million. However, GAO found that some continuing contracts were double-counted, while others were missing from the reports. GAO also found other types of errors, such as a fully funded contract that was incorrectly included in the quarterly report as a continuing contract. These errors raise questions about the accuracy of the reports. GAO identified similar inaccuracies in the Corps' quarterly reports during its 2006 review and at that time recommended that the Corps develop a tracking system to monitor its use of these contracts. While the Corps believes its system of asking divisions to provide information on a quarterly basis is sufficient for tracking continuing contracts, GAO disagrees. Without a tracking system supported by sufficient internal controls to ensure accuracy, errors can persist in the information provided to Congress. The Corps' use of the new clause has generally not affected the agency's ability to execute its Civil Works program. The Corps decreased its use of continuing contracts beginning around the time that the new clause was initiated. However, while acknowledging that the transition to the new clause created some initial difficulties that have since been overcome, Corp officials did not provide any examples of work being stopped on a project because funds were not available. The Corps did not comply with a legal requirement in implementing the new clause, resulting in some districts' reluctance to use it. Section 22 of the Office of Federal Procurement Policy Act (OFPP Act) generally provides that no procurement regulation that has a significant effect beyond the internal operating procedures of the agency or a significant cost on contractors or offerors may take effect until 60 days after the procurement regulation is published for comment in the Federal Register. This requirement may be waived in urgent and compelling circumstances; however, the regulation must still be published in the Federal Register stating that it is temporary and providing for a public comment period of 30 days. Although the Corps has requested approval since 2006 from the Department of the Army and the Department of Defense, as it is required to, the clause has never been published and the Corps has continued to use it. GAO believes that the Corps' argument that its pursuit of publication satisfies the statute is unpersuasive. Moreover, GAO spoke with Corps officials from districts and divisions who expressed concern about using the clause prior to its publication. Specifically, they are concerned that using the clause could subject the Corps to legal challenges, such as bid protests, and that such potential challenges could delay projects and increase their costs.