Embassy Construction: Pace Is Slower Than Projected, and State Could Make Program Improvements
Fast Facts
Responding to two 1998 terrorist bombings of U.S. embassies, the State Department embarked on a program to construct more secure embassies. While it had completed 77 as of September 2017, State won't reach its goal of 180 new embassies by 2018.
Unexpected requirements—such as adding office annexes—and not accounting for inflation have contributed to slowing project delivery. With over 20 embassies under construction and 72 planned, State faces staffing shortages and strained contractor relationships.
We made recommendations to State to plan for inflation, analyze funding and workforce needs, and seek improved contractor relationships.
The new U.S. Consulate General building in Monterrey, Mexico
Picture of a modern building with a brick entryway at night with lights and plantings.
Highlights
What GAO Found
The Department of State's (State) Bureau of Overseas Buildings Operations (OBO) has constructed new embassies at a slower pace than forecast due in part to unexpected building requirements and inflation. In 1999 State identified a need to replace 180 embassies. In 2005, with about 30 projects underway, State planned to replace the other 150 embassies by 2018. Since 1999, OBO has built 77 embassies under its Capital Security Construction Program (CSCP), at a total cost of about $24 billion as of fiscal year 2017. CSCP's pace has been affected by unexpected additional building requirements, such as office annexes and Marine quarters. Also, CSCP received only one program funding adjustment for inflation since 1999, and State does not intend to seek annual adjustments. Currently, OBO does not provide information on inflationary effects on CSCP or an estimated total capital investment or feasible time frames for the nearly 50 embassies identified for replacement beyond 2022. Lack of such information may affect stakeholders' ability to make informed budget decisions.
Status of State's Capital Security Construction Program for New Embassies and Consulates
Note: While State forecast an intention to build 180 new embassies in 1999, it subsequently decided to take a different approach for about 10 posts by keeping some existing embassies and upgrading them.
While cost growth occurred on a majority of completed embassy projects and durations averaged about 36 months, these were generally within budgeting and planning allowances. GAO could not assess performance of Excellence projects because none had been completed as of the end of fiscal year 2017.
Staffing workload and contractor collaboration have affected OBO's project delivery. Without an OBO-wide workforce analysis, it is unclear whether OBO's staffing is commensurate with its workload needs. OBO maintains that its office overseeing project design reviews is understaffed, adversely affecting some of its critical functions. Contractors also expressed concerns about the quality of design reviews, which may be affected by a staffing shortage and the use of temporary contractors. Also, OBO and contractor officials acknowledged weaknesses in collaboration, particularly with regard to contractors less experienced with embassy construction. Of the five contractors GAO spoke with, three said they are unlikely to pursue future projects because of issues working with OBO. Formal construction partnering—an industry best practice—between OBO and its contractors could help avoid adversarial relationships that inhibit swift resolution of issues. OBO's two long-standing contractors that have completed most of the CSCP embassy projects participated in early projects OBO identified as having used formal partnering.
Why GAO Did This Study
In 1998, terrorists bombed two U.S. embassies in East Africa, killing over 220 people and injuring more than 4,000 others. In 1999, State launched the CSCP with the primary goal of providing secure, safe, and functional workplaces, and OBO adopted a streamlined, standard design for all new embassies. In 2011, OBO shifted to the Excellence approach for new embassies, where greater use of custom designs is intended to improve embassies' functionality, quality, operating costs, and appearance.
GAO was asked to review the performance of the CSCP. This report examines (1) the pace of the CSCP in constructing new embassies, (2) the cost and schedule performance of OBO's recent embassy construction projects, and (3) key factors that have affected State's ability to deliver construction projects efficiently. GAO analyzed information from State planning, funding, and reporting documents and interviewed State and contractor officials. As part of an assessment of nine construction case-study projects, selected for cost or schedule increases, GAO conducted four site visits to embassies under construction.
Recommendations
GAO recommends that State (1) provide information on the estimated effects of inflation on planned projects, (2) provide an analysis of estimated total costs and time frames to complete the CSCP, (3) conduct an OBO-wide workforce analysis, and (4) pilot formal construction partnering. State concurred with our recommendations and also conveyed it is now pursuing other initiatives beyond Excellence.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of State |
Priority Rec.
The Secretary of State should determine the estimated effects of cost inflation on planned CSCP embassy construction capacity and time frames and update this information for stakeholders on a regular basis, such as through the annual budgeting process. (Recommendation 1) |
State concurred with this recommendation, and in response, OBO integrated an inflation rate based on construction industry cost indices into its annual Bureau Budget Request. Subsequently, in its fiscal year 2023 budget request, State presented an analysis of global construction inflation's effect on planned embassy construction capacity. Specifically, State estimated that with an average inflation rate of 3.55 percent between fiscal year 2014 and fiscal year 2023, on a $2.2-2.6 billion new construction program, this results in $75 million lost in purchasing power in 2015 and reaches $704 million lost in purchasing power by 2023. As a result, stakeholders have essential information with which to chart the future course, priorities, and funding levels for the CSCP.
|
| Department of State |
Priority Rec.
The Secretary of State should provide an analysis for stakeholders identifying those embassies that still need to be replaced to meet State's security standards and estimating total CSCP costs and projected time frames needed to complete those projects. (Recommendation 2) |
State concurred with this recommendation, and in response OBO conducted an analysis of total CSCP costs and timeframes. As of January 2020, State/OBO had calculated that if all of its remaining 160 facilities were to be replaced, it would cost approximately $58.3 billion in current year dollars. According to OBO, at a $2.2 billion program funding level for new construction in current year dollars, the projected time frame could take 25 to 30 years if all of these projects were initiated. OBO calculated that if all of its remaining 160 facilities were to be replaced, it would cost approximately $58.3 billion in current year dollars. According to OBO, at a $2.2 billion program funding level for new construction in current year dollars, the projected time frame could take 25 to 30 years if all of these projects were initiated. OBO briefed this estimate to government agencies paying into the CSCP in September 2019, and the United States House Committee on Appropriations Subcommittee on State, Foreign Operations, and Related Programs in February 2020. In March 2020, OBO officials stated that a further brief to the United States Senate Committee on Appropriations Subcommittee on State, Foreign Operations, and Related Programs would be forthcoming.
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| Department of State |
Priority Rec.
The Secretary of State should ensure that the Director of OBO conducts an OBO-wide workforce analysis to assess staffing levels and workload capacity needed to carry out the full range of OBO's mission goals, to include the CSCP. Such an assessment could provide a basis for broader stakeholder discussion of OBO's human capital needs and potential prioritization of activities. (Recommendation 3) |
State concurred with this recommendation and in response, contracted with Institute for Defense Analysis (IDA) to conduct an organizational review and workforce assessment to provide the evidentiary matter necessary to redefine OBO's strategic building goals, set workload priorities to improve embassy quality and safety, ensure security compliance, and consider career progression in hiring and retention of OBO personnel. IDA completed its assessment in June 2020 and provided over 50 recommended actions for OBO's consideration. As a result, OBO management is better positioned to make strategic decisions regarding the Bureau's mission goals and workload priorities.
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| Department of State | The Secretary of State should ensure that the Director of OBO pilots formal construction partnering for the CSCP, particularly with construction firms that are new or less experienced with the program. (Recommendation 4) |
State concurred with this recommendation, and in response has begun two pilot projects for partnering with contractors less experienced with the CSCP: the Kampala New Office Annex and the Moscow Compound and Housing Renovation projects. According to OBO, these projects were selected based on the contractors, contract delivery method, size and location of the projects, and a willingness to partner on the part of the project teams. Additionally, OBO has selected a consultant to assist this program through development of partnering templates, scopes of work, and training materials for the two pilots' project teams. The partnering implementation process has formally begun on the Kampala project, and according to OBO officials, a partnering facilitator for this project has been selected. OBO officials projected formal partnering activities to kick off for Moscow in July 2019.
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