The Corps Cannot Accurately Identify How Many Continuing Contracts It Has Awarded because It Does Not Track These Contracts

The Corps does not track information on the number of contracts that it  awards with a continuing contracts clause; therefore, it could not identify  the number or the dollar value of such contracts awarded in fiscal years  2003–2005. We independently identified the number of continuing  contracts awarded by the Corps in fiscal years 2003–2005 by reviewing the  agency’s contracting data, and we determined that 1,592 (about 10  percent) of all contracts awarded during this 3-year period most likely  included and used a continuing contracts clause. The full costs to the federal  government of the 1,592 contracts were more than $3.96 billion at award. However, the Corps only obligated $655 million to current appropriations  when these contracts were awarded; the outstanding commitment at the  time of award was about $3.30 billion, and the Corps expects to obligate  this amount to subsequent years’ appropriations. Prior to 2005, the Corps Routinely Included a Continuing Contracts Clause in Most Contracts

The Corps’ routine practice was to include a continuing contracts clause in  most of the contracts it awarded during fiscal years 2003–2005. For example, for the 107 randomly selected  continuing contracts awarded in fiscal years 2003–2005 that we reviewed,  we found only 8 continuing contracts that were valued at more than $10  million dollars and involved contracted work that required more than 12  calendar months to complete. In contrast, many of the 107 continuing  contracts we reviewed were short-term and/or low dollar value contracts. These  actions helped the Corps meets its policy of expending all available  appropriations in the fiscal year appropriated by allowing the money to be  spent on other contracts. The Corps’ Revised Processes for Approving Continuing Contracts Has Reduced Their Use, but It Still Lacks Criteria for When Their Use Is Appropriate

In fiscal year 2005 and again in 2006, in response to congressional  committee direction, the Corps implemented new processes that require  districts to, among other things, obtain headquarters’ approval before  using continuing contracts. As a  result, headquarters continues to receive and approve continuing  contracts for short-term, low dollar value contracts. The guidance also established criteria for the kinds of  situations in which a contract should generally be fully funded. To respond to these new congressional requirements, in December 2005,  the Corps issued additional guidance that is effective through the end of  fiscal year 2006, which, among other things:reaffirmed its policy that districts should use fully funded contracts as  their primary contracting option;   directed that continuing contracts should only be used as the contracting  option of last resort;   summarized new information that the districts are required to provide in  their requests to use continuing contracts, including an explanation on  why using a continuing contract is in the best interest of the government;  and   directed districts to take measures to ensure that contractor costs  generally do not exceed the amount appropriated for projects in fiscal year  2006. The Corps believes that these requests  demonstrated a strong business case for using a continuing contract;  however, we believe that the Corps might have been able to fully fund  some of these contracts if, at the time of award, the Corps had adequate  appropriations to cover the contract amount. Recommendations for Executive Action

To ensure the judicious use of continuing contracts by the Corps districts  and to provide better management of projects that use such contracts, we  recommend that the Secretary of Defense direct the Commanding General  and the Chief of Engineers of the U.S. Army Corps of Engineers to take the  following three actions:    eliminate the routine use of continuing contracts by adopting good project  planning and management practices rather than relying on continuing  contracts;   establish meaningful criteria for the use of continuing contracts, including  an assessment of dollar value and length of time needed to complete  contracted work so that districts have clear guidance on when a  continuing contract may be used; and    develop a tracking system to monitor the use of continuing contracts. Appendix I: Scope and Methodology

To determine the number and dollar amount of continuing contracts the  U.S. Army Corps of Engineers (Corps) awarded during fiscal years 2003– 2005, we reviewed the Corps’ quarterly reports to the appropriations  committees on their use of these contracts. To determine how the Corps’ process for approving and using continuing  contracts changed since 2005 and whether the changes reduced their use  of these contracts, we obtained Corps guidance documents for approving  and using continuing contracts and interviewed Corps officials at districts,  divisions, and headquarters.
Why GAO Did This Study

The U.S. Army Corps of Engineers (Corps) is authorized under the River and Harbor Act of 1922 to issue contracts with a continuing contracts clause to carry out certain projects. This allows the Corps to award multi-year contracts without having received appropriations to cover the full contract amount. The Corps has used these contracts for decades, but modified their use in 2005, in response to congressional committee concerns that their use may have been ineffective. GAO was asked to determine (1) the number and dollar amount of continuing contracts the Corps awarded during fiscal years 2003?2005; (2) the circumstances in which the Corps used continuing contracts in fiscal years 2003-2005; and (3) how the Corps' process for approving and using continuing contracts changed since 2005, and whether the changes reduced the use of these contracts. For these objectives, GAO reviewed the Corps' contracting data, a random sample of 107 continuing contracts, and districts' requests to use continuing contracts

What GAO Found

The Corps does not know how many continuing contracts it awarded in fiscal years 2003-2005 or the dollar value of these contracts, because it does not track information on the contracts awarded with a continuing contracts clause. Although the Corps was directed to provide the appropriations committees with quarterly reports on their use of continuing contracts in fiscal year 2006, GAO found that the information was inaccurate. For example, at least 13 continuing contracts were missing from the reports and 10 continuing contracts had inaccurate values. Because the Corps could not provide information on the number of continuing contracts awarded for fiscal years 2003-2005, GAO analyzed the Corps' contracting data and determined that 1,592 contracts awarded in these 3 years most likely included and used a continuing contracts clause. These contracts were expected to cost more than $3.96 billion when awarded and would generally be funded to cover the full contract amount (fully funded) pursuant to requirements of the Antideficiency Act. However, continuing contracts are exempt from the act. Consequently, the Corps only obligated $655 million when it awarded these contracts, leaving an outstanding commitment of about $3.30 billion to be covered by future years' appropriations. During fiscal years 2003?2005, the Corps' standard operating practice was to include a continuing contracts clause in most contracts. As a result, many continuing contracts were used for short term and low dollar value contracts. The Corps might have been able to fully fund some of these contracts if, at the time of award, the Corps had adequate appropriations to cover the contract amount. For example, for the 107 continuing contracts GAO reviewed, about one-third were valued at less than $1 million. In only 8 of 107 continuing contracts that GAO reviewed, the contract value was more than $10 million and involved work that required more than 12 calendar months to complete. The Corps also used continuing contracts extensively to move funds among projects and help meet its policy of expending all available appropriations in the fiscal year appropriated. For fiscal years 2003-2005, GAO found that over half of the contracts reviewed were awarded during the last quarter of the fiscal year as continuing contracts with little or no associated obligations, thereby shifting the obligations to pay for these contracts into future years. The Corps responded to congressional committee direction in 2005 and again in 2006 to monitor the use of continuing contracts by, among other things, requiring districts to obtain headquarters' approval before using such contracts. The new processes reduced the use of continuing contracts, but have not prevented the approval of continuing contracts for short-term, low dollar value contracts. This occurred because the Corps established criteria on when contracts should be fully funded, but did not establish criteria for when continuing contracts should be used.