	Progress on the KMCC Has Been Slow, Quality Problems Persist, and Project Costs Are Unknown

Approximately 1 year after our initial testimony and over 2 years after the  KMCC’s originally scheduled construction completion date, the project  continues to experience significant cost and schedule uncertainty along  with construction quality problems and ongoing criminal investigations. Since our testimony in June of 2007, limited progress has been made on  KMCC construction, and estimates of how much the total project will cost  or when it will be completed are uncertain. Specifically, tens of millions of dollars related to design,  foreign currency fluctuation, rework, personnel, and furniture and  equipment costs are not included in the Air Force’s cost to date or  estimate for construction completion of the project. Contingencies to fund  items such as potential hindrance claims are also not included in the  estimated costs for construction completion. When including all estimated  costs, the total cost of the project will likely exceed $200 million. In addition, major construction deficiency problems, such as the leaking  roof and improperly installed kitchen exhaust ducts, which we discussed  in our 2007 testimony, are just now being repaired. Final Costs of the KMCC Project Are Still Unknown

Because the Air Force does not track the total cost of the KMCC project,  there are no accurate estimates of how much the total KMCC project will  cost. Construction deficiency repairs. Concrete cracking. According to an Air Force estimate, on average  each month that the opening of the hotel is delayed results in the U.S.  government paying an additional $90,000 for off-base lodging of displaced  personnel traveling at the government’s expense. The Air Force Has Improved Controls over the KMCC Project

The Air Force has made significant improvements in its oversight and  internal controls over the KMCC project. The Air Force has also  standardized its invoice and change order review processes to minimize  future risks of paying for unapproved work. These repeated meetings between U.S. and German  officials prompted the German government to provide $37.9 million (25  million euros) to the project for backlogged change orders and repair  work. Other Recent U.S. Projects on Ramstein Air Base Have Experienced Similar Problems

Other projects recently completed in the KMCC area managed by LBB- Kaiserslautern have experienced problems similar to those affecting the  KMCC. In addition,  officials were concerned that a building attached to the freight terminal  was also structurally deficient as a result of potentially insufficient welds  on the structural steel. Appendix I: Scope and Methodology

To determine the current status of the Kaiserslautern Military Community  Center (KMCC) construction project, including projected costs, cost  completion analyses, projected construction completion dates, and status  of ongoing investigations, we interviewed officials from the Air Force at  Ramstein Air Base in Germany, the Army and Air Force Exchange Service  (AAFES), the Air Force Services Agency (AFSVA), the U.S. Army Corps of  Engineers (USACE), the Air Force Audit Agency, the Air Force Office of  Special Investigations (AFOSI), and the Department of State. To determine whether oversight and internal control improvements have  been made by the Air Force since our last testimony, we interviewed Air  Force officials from the KMCC Resident Director’s Office. We obtained and reviewed project  management plans, standardized policies and procedures, cost estimates,  training materials for certifying officers and accountable officials, and  other relevant documents related to project management.
Why GAO Did This Study

The Kaiserslautern Military Community Center (KMCC) is one of many projects initiated at Ramstein Air Base to upgrade capabilities of the base as a result of the consolidation of military bases in Europe. The KMCC is intended to provide lodging, dining, shopping, and entertainment for thousands of U.S. military and civilian personnel and their families in the area. Construction on the project, which began in late 2003, was originally scheduled to be completed in early 2006. On June 28, 2007, GAO testified that construction deficiencies and mismanagement had drawn into question when the project would be completed and at what cost. This testimony discusses updated findings related to the KMCC project. The testimony describes (1) the current status of the KMCC construction project, (2) whether oversight and internal control improvements have been made by the Air Force since GAO's last testimony, and (3) if other projects recently completed in the KMCC area have experienced problems similar to those affecting the KMCC. To address the objectives, GAO interviewed officials from the U.S. Air Force, Army and Air Force Exchange Service (AAFES), Air Force Services Agency, U.S. Army Corps of Engineers, Department of State, and German government. GAO also conducted site visits and reviewed project plans, cost estimates, completion analyses, and other relevant KMCC documents.

What GAO Found

Approximately 1year after GAO'sJune 2007 testimony and over 2years after the KMCC's originally scheduled construction completion date, the project continues to experience significant cost and schedule uncertainty along with construction quality problems and ongoing criminal investigations. Limited progress has been made on KMCC construction, and there are still no accurate estimates of how much the total project will cost or when it will be completed. Major construction deficiencies GAO reported in 2007 are just now beginning to be corrected. In addition, the Air Force does not track the total cost of the KMCC. Specifically, tens of millions of dollars related to design, foreign currency fluctuation, rework, personnel, and furniture and equipment costs are not included in the Air Force's cost estimates. Contingencies to fund items such as repairs to cracking concrete are also not included in the Air Force's estimates. After including all estimated costs, the total cost of the project will likely exceed $200 million. Project delays have also resulted in additional costs to the U.S. government and lost profit for project funding partners. For example, AAFES estimates that it is losing $500,000 of profit for each month that the exchange facility is not open. Although these problems exist, the Air Force has made significant improvements in its oversight and control over the project. For example, the Air Force established standardized policies and procedures for reviewing change orders and invoices. Improvements in controls over payments and change orders have minimized future risks of paying for unapproved work or fraudulent billings for work not performed. Cost, schedule, and construction deficiencies affected other projects built by German government construction agents in the KMCC area. For example, underground electrical ducts at Ramstein Air Base flood with water causing runway lights to malfunction. A freight terminal on the air base was also built with structural deficiencies that resulted in its temporary evacuation.