This hearing compilation was prepared by the Homeland Security Digital Library, Naval Postgraduate School, Center for Homeland Defense and Security.

JULY 9, 2015

CONSTRUCTION COSTS AND DELAYS AT THE U.S.

EMBASSY IN KABUL

U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

ONE HUNDRED FOURTEENTH CONGRESS, FIRST SESSION

HEARING CONTENTS: MEMBER TESTIMONY

Committee Chairman Jason Chaffetz [view PDF] WITNESS TESTIMONY

Lydia Muniz [view PDF] Director, Bureau of Overseas Buildings Operations, U.S. Department of State

Michael J. Courts [view PDF]

Director, International Affairs and Trade, U.S. Government Accountability Office Gregory B. Starr [view PDF]

Assistant Secretary, Bureau of Diplomatic Security, U.S. Department of State

Donald S. Hays [view PDF] Senior Inspector, Office of the Inspector General, U.S. Department of State

Jarrett Blanc [view PDF]

Principal Deputy, Special Representative for Afghanistan and Pakistan, U.S. Department of State

Michael L. Gulino [view PDF]

President and Chief Executive Officer, Aegis LLC

This hearing compilation was prepared by the Homeland Security Digital Library, Naval Postgraduate School, Center for Homeland Defense and Security.

AVAILABLE WEBCAST(S)*:

https://www.youtube.com/watch?v=24GV8fZ_4OU

COMPILED FROM:

https://oversight.house.gov/hearing/construction-costs-and-delays-at-the-u-s-embassy-in-kabul/ * Please note: Any external links included in this compilation were functional at its creation but are not maintained thereafter. https://www.youtube.com/watch?v=_HtfkMmA-xM&feature=youtu.be

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Chairman  Jason  Chaffetz  Opening  Statement  

Kabul  Embassy  Hearing  July  9,  2015  

 Keeping  Americans  safe  who  work  in  Foreign  Service  in  Kabul,  Afghanistan  is  a  constant  challenge.  Just  last  week,  Taliban  militants  attacked  a  NATO  convoy  just  500  yards  from  the  U.S.  Embassy  in  Kabul.      The  week  before,  militants  stormed  the  Afghan  parliament  in  Kabul  in  broad  daylight  in  what  appears  to  be  a  coordinated  attack.      These  incidents  make  clear  we  have  to  ensure  our  brave  men  and  women  serving  in  these  hostile  environments  are  safe.  And  one  of  the  best  ways  to  ensure  their  safety  is  to  provide  secure  facilities  for  them  to  perform  their  diplomatic  missions.      Due  to  mismanagement  by  the  State  Department,  however,  that  is  not  happening  in  Kabul.  As  a  result,  the  American  diplomatic  staff  in  Afghanistan  are  being  exposed  to  unnecessary  danger.      Last  July,  the  Government  Accountability  Office  reviewed  the  construction  of  the  Kabul  embassy  facility  and  found  the  State  Department  failed  to  properly  acknowledge  known  risks.    These  known  risks  included:        

• The  award  of  a  contract  for  work  before  the  contract  site  was  acquired;  • An  unrealistic  schedule  for  the  work  to  be  completed  under;  • Changes  in  the  number  of  staff  at  the  complex;  and    • Changes  in  the  design  of  the  building  and  security  requirements.  

 As  a  result  these  failures,  construction  would  take  more  time  and  cost  more  money,  leaving  Embassy  staff  in  less  secure,  temporarily  facilities.  In  May,  GAO  once  again  reviewed  the  construction  of  the  new  Embassy  complex  in  Kabul.    And  once  again,  the  review  identified  a  number  of  significant  –  but  preventable  –  problems.    This  lack  of  planning  by  the  State  Department  resulted  in  cost  overruns  and  delays.        Construction  is  now  projected  to  come  in  at  least  27  percent  over  budget  and  more  than  three  years  behind  schedule.  The  project  was  originally  expected  to  cost  $625  million.  It  is  now  estimated  to  cost  at  least  $792  million.      Because  the  State  Department  failed  to  properly  plan  for  the  project,  it  is  continuing  to  negotiate  with  its  contractor.  So  the  current  cost  overruns  could  become  much  larger.      

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One  of  the  factors  causing  these  delays  and  cost  overruns  is  the  Department’s  failure  to  follow  its  own  directive  to  have  a  strategic  facilities  plan.        As  its  name  implies,  a  strategic  facilities  plan  outlines  how  a  particular  facility  will  be  developed  and  used.  The  need  for  a  strategic  facilities  plan  is  especially  critical  for  facilities  like  Kabul,  where  there  is  a  high  turnover  in  personnel.      The  State  Department  recently  rescinded  the  requirement  to  development  a  strategic  plan  for  any  facility,  which  was  a  requirement  that  had  been  in  place  since  1990.  So  because  of  the  State  Department’s  poor  planning,  the  use  of  temporary  facilities,  where  Americans  must  live  and  work,  will  continue  indefinitely  in  Kabul.      In  fact,  amazingly,  the  State  Department  recently  requested  an  additional  $124  million  for  temporary  facilities.      It  is  unclear  why  State  didn’t  do  a  better  job  planning  for  permanent  and  secure  buildings,  which  resulted  in  wasting  taxpayer  dollars  on  temporary  facilities.    Not  only  does  State  not  properly  plan  for  permanent  facilities,  it  also  has  no  standards  for  temporary  facilities.  The  State  Department’s  own  actions  in  Kabul  make  clear  how  critical  such  standards  are.      In  its  FY  2008  budget  request,  State  expressed  to  Congress  concerns  about  the  threat  to  the  Kabul  facility  posed  by  incoming  weapons  fire.      However,  as  GAO  pointed  out  “the  only  security  protection  measure  specified  in  the  2009  contract  for  the  temporary  housing  was  shatter-­‐resistant  window  film.”    I’m  no  expert,  but  I  don’t  think  “shatter-­‐resistant”  windows  can  stop  a  bullet,  or  worse,  a  grenade.    In  contrast,  State  contracted  for  the  temporary  offices  to  have  a  higher  level  of  security  and  ballistic  protection  than  the  temporary  housing  it  built.  This  means  that  employees  were  safer  working  24-­‐hours  a  day  than  returning  to  their  temporary  housing.        The  lesson  here  is  clear:    when  there  are  no  standards  or  guidance,  the  results  are  inconsistent  and  Americans  are  unsafe.    We  have  to  do  a  better  job  of  getting  our  folks  into  the  safer  new  facility  as  soon  as  possible  without  incurring  additional  cost  overruns.        The  need  to  get  this  right  is  absolutely  urgent.  

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Statement of

Lydia Muniz

Director of Overseas Buildings Operations,

United States Department of State

Before the

House Oversight and Government Reform Committee

July 9, 2015

Chairman Chaffetz, Ranking Member Cummings, and Members of the Committee

– I appreciate the opportunity to appear before you today to discuss the U.S.

Department of State’s construction project at the U.S. Embassy in Kabul,

Afghanistan.

I am Lydia Muniz, Director of the Bureau of Overseas Buildings Operations

(OBO). As the single real property manager for all U.S. government diplomatic

properties overseas, OBO manages the worldwide design, construction,

acquisition, sale and maintenance of overseas real property. OBO’s portfolio

includes the real property platform supporting 275 missions in 190 countries

around the world; over $5 billion of projects in design and $8 billion in

construction; and over 85 million square feet of owned and leased office and

residential property.

With over 1,000 employees serving in Washington and abroad, OBO administers

an annual capital construction budget of $2.5 billion and an operating budget of

over $800 million. To this base, Congress has provided additional funds as well as

supported reprogramming of funds necessary to meet emergent needs for projects

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in Iraq, Afghanistan, and other high threat locations, as well as facilities to expand

the Marine Security Guard program.

In all cases, OBO’s mission is the same – working closely with colleagues from the

Bureau of Diplomatic Security – to provide safe, secure and functional facilities

that support the needs of our personnel serving abroad and the foreign policy

objectives of the U.S. government.

Since enactment of the Secure Embassy Construction and Counterterrorism Act

(SECCA) of 1999 and the development of the Department’s Capital Security

Construction Program, OBO – with the support of Congress – has completed

construction of 79 new embassies or consulates, with 22 more under design or

construction. Together, we have moved over 32,500 people into safer, more secure

facilities – and plan to move another 14,420 within the next 5 years.

The United States re-opened the U.S. Embassy in Afghanistan in December 2001.

The mission first made use of the existing chancery building, completed in 1971.

In 2005, OBO completed a new office building, three new residential buildings and

support facilities to sustain the growing needs of the Embassy. These permanent

facilities provided 250 desks and 158 residential units, including 12 in the Marine

Security Guard Residence.

In FY 2009 and 2010, OBO awarded two contracts to different contractors that

would provide for additional capacity on the embassy compound. The scope of

these projects included a classified annex, an unclassified annex, three residential

facilities, recreation and dining facilities, parking and vehicle maintenance

facilities, a power plant and other infrastructure upgrades needed to support the

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growing embassy population, and additions to the existing Marine Security Guard

Residence and to the warehouse; as well as new perimeter walls, guard towers and

compound access control facilities. The project also provided for non-permanent

facilities to meet mission needs as efforts moved forward to complete permanent

construction and to provide capacity for surge requirements. The total project

budget was $881 million.

When completed, the current project will provide 1,237 desks (917 unclassified

and 320 classified) and 658 residential units in permanent facilities; as well as 575

desks and 540 beds in temporary facilities.

From the beginning, the goal has been, and continues to be, to press forward to

deliver permanent, safe and secure facilities to support those serving in

Afghanistan. In spite of fluid conditions and the logistical challenges of managing

an ongoing construction project on an occupied compound and in a war zone – I

am pleased to report that the unclassified annex, with a capacity of 917 desks, will

be completed this month. In November of this year, the first residential facility

will be delivered with 226 residential units. Less than one year later, in October

2016, the classified annex, with a capacity of 320 desks, will be completed. And

the following October will see the delivery of the final two residential facilities

with 432 units.

When completed, the Embassy Compound – to include the existing old Chancery

building, existing office building and 3 existing residential facilities – will have the

capacity for 1,487 desks and 806 residential units. If compressed, the facilities

could accommodate up to 1,771 desks and 1,330 beds. In addition, temporary

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facilities, if left in place for surge requirements, could provide an additional 575

desks and 540 beds.

These accomplishments have been and will be achieved in the face of significant

challenges. I will outline here some of the challenges and modifications that have

had the most significant impact on the original cost and schedule of the project.

The 2009 contract. The scope of the 2009 project included an unclassified

annex to accommodate 545 desks, one residential facility with 193 units,

support facilities and infrastructure, as well as temporary facilities to

accommodate 875 desks and 432 beds, a cafeteria and recreation facilities.

The Department, based on concerns with the contractor’s ability to deliver

both the temporary and permanent facilities on schedule, terminated the

contract for convenience and added the permanent facilities to the scope of

the 2010 contract. While this increased the cost and duration of the original

project, it was the best course of action to move forward as expeditiously as

possible.

An increase in scope from 545 permanent desks to 1,237 desks. This

change to provide additional desks in Kabul added significant scope to the

original project after the award of the 2009 contract. Both the original and

the added scope were later transferred to the 2010 contract.

Additional security requirements as the security situation in

Afghanistan, including in Kabul, deteriorated. These include a new

Tactical Operations Center, upgraded walls, guard towers, an additional

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compound access control facility and sidewall protection for temporary

facilities.

A delay in vacating space needed by the contractor to build the

unclassified annex. Due to national security priorities that drove embassy

staff numbers, the embassy was not able to vacate temporary facilities on

schedule to allow the contractor to move forward with construction of the

permanent unclassified annex.

Modifications to the old chancery building to make it more functional

for post in the short term. This included re-configuration and the addition

of classified space to the old chancery building.

The elimination of scope planned for property occupied by the

Afghanistan Ministry of Public Health. The United States Agency for

International Development (USAID) had an agreement with the Ministry to

provide new facilities with increased capacity in exchange for property the

Ministry occupied adjacent to the U.S. Embassy compound. After

significant delays, the agreement fell through and the property was never

transferred to the U.S. government. The scope planned for that property was

eliminated from the contract – but triggered efforts to accommodate the

original scope elsewhere on the Embassy compound. Many of those

requirements remain outstanding.

The closure at the Pakistani border from November 2011 to July 2012.

92 containers, with 622 tons of bulk materials, were held in Pakistan for over

7 months. This temporarily eliminated the most direct ground shipping

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route for the project, forcing the Department to ship 374 unclassified

containers via the much longer – and thus more expensive – “northern

route.” In addition, an estimated 180 containers of classified materials will

be sent to Kabul by air.

The cumulative impact of these changes is the addition of over two years to the

project schedule and $250 million. Cost increases have been funded using a

combination of the following sources: a modification to the FY 10 budget before

contract award, use of a management reserve and project contingency, as well as

reprogrammings submitted to Congress. In spite of all of these challenges, OBO

has done everything possible to press forward with one of our most complex

projects, maintaining the goal of moving as many people into safer, more secure

facilities as quickly as possible.

I would now like to address concerns expressed by GAO regarding OBO’s

planning and development of the project in Kabul. The GAO report suggested that

the cost and schedule of the project increased, in part, due to incomplete cost and

risk assessments. While value engineering and risk assessments are important

tools in conducting our work, and while – per the GAO recommendation – we have

updated our policies and procedures on value engineering and risk assessments, I

reject the notion that more thorough cost and risk assessments would have had a

material impact on the cost or schedule of the Kabul Embassy project. Instead, I

would argue that additional assessments would have risked further delaying

delivery of permanent facilities.

As outlined above, the material changes and challenges to the project were not

known and could not have been known at the time of the development and award

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of the project. And while the Department, in theory, might have spent longer

analyzing the evolving situation on the ground – this analysis would have delayed

the contract award, and ultimately, the delivery of the project – without materially

improving it. Cost increases and project delays were not avoidable.

The GAO also suggested that the Kabul project was not appropriately planned to

take into account the mission’s needs to the maximum extent possible. I also reject

this notion.

The Embassy Kabul project, when awarded, was planned and designed to provide

for the full complement of office and residential facilities – as well as all necessary

support and infrastructure – required at that time. The plan and design were based

on the assumption of a stand-alone embassy – with a continued Department of

Defense (DoD) presence, until a draw-down of that presence was announced.

Fluid situations, such as the one in Afghanistan, differ markedly from normal

operations. It is unrealistic to expect the development of a static master plan that

would have captured all requirements at the beginning of an 8-year project –

without periodic reviews, during and after the execution of the project, to ensure

that the mission’s evolving needs were captured to the maximum extent possible.

A second planning effort was initiated in January of 2014 in anticipation of the

Administration’s announcement in May of that year that, by the end of 2016, the

U.S. military would draw-down to a normal embassy presence in Kabul with a

DoD security assistance component.

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The GAO report further suggested that OBO should have developed a strategic

facilities plan for Kabul and referenced OBO’s rescinded policy and procedure on

Long Range Facility Plans (LRFP) as a model that should have been used in

Kabul. The rescinded policy and procedure reads that:

“[the] LRFP program… will be directed at those posts not covered in OBO’s

regular capital or security capital programs.… [the] LRFP is intended to

provide a clear definition of posts requirements such that stakeholders and

decision-makers have the relevant data prior to making decisions to fund and

execute projects.”

The Department’s plans and projects in Kabul are clearly excluded from the

category of posts for which an LRFP would have been conducted because Kabul

had already been included in the Capital Security program. The policy and

procedure on long range facilities plans – referred to in the GAO report – was

rescinded because it was outdated and assigned responsibility to offices that no

longer exist. The goals of the former long range facilities plans have been

superseded by a more dynamic system that is managed by offices responsible for

master planning and facilities operations.

Our work in Afghanistan represents some of our most important efforts. We know

the Department and all U.S. government personnel serving there rely on OBO to

provide a safe and secure platform. We know that any delay to the project affects

hundreds of people who take risks every day to serve their country. Every day and

with every decision, we do our best to deliver a safe platform that allows them to

perform their duties safely and securely. And we will continue to do so until our

work in Kabul is complete.

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As with every project OBO undertakes, whether it is a normal operating

environment or those experienced in Afghanistan and Iraq, we learn valuable

lessons which we apply to future projects. We will continue to work with post,

other stakeholders and Congress to meet our requirements to provide 1,487 desks

and 806 beds in permanent, secure facilities by fall 2017.

I want to conclude by acknowledging that Congress has been an important partner

in helping to ensure that our staff serve abroad in more secure facilities. Congress

has consistently supported the cost sharing program – and, in FY 2013, provided

increased funding to help the program keep pace with inflation. We will continue

to live up to our commitments to place our staff in safe and secure facilities.

I look forward to answering your questions.

Lydia Muniz

Director, Bureau of Overseas Buildings Operations

Lydia Muniz has served as the Acting Director and Director of the U.S. Department of State Bureau of Overseas Buildings Operations (OBO) since 2011. Prior to this appointment, she served the organization as Principal Deputy Director. OBO directs the worldwide overseas building program for the Department of State and serves as the real property manager for the U.S. government’s diplomatic properties overseas.

Ms. Muniz was previously with New York University (NYU) from 2001 to 2009 where she served in a number of positions, most recently as Associate Vice President in the Office of Strategic International and Business Projects, advising the university on the development of international branch campuses; and Associate Vice President for the Division of Campus Planning, Design and Real Estate, providing leadership for the University in the areas of capital planning, space planning, design and real estate planning, acquisition and sales.

Prior federal service includes positions as Deputy Director of the Department of Media Affairs in the Organization for Security and Cooperation in Europe (OSCE), Mission to Bosnia and Herzegovina (BiH); Special Assistant for Policy in the Office of the Secretary of the Army; Legislative Assistant in the Office of Legislative Affairs of the Office of Management and Budget (OMB); and Office Manager for the Honorable Leon E. Panetta in the U.S. House of Representatives.

A graduate of the University of California at Berkeley, Ms. Muniz also holds a Masters degree in International Affairs from Columbia University, School of International and Public Affairs, with a concentration in Economic and Political Development.

AFGHANISTAN Embassy Construction Cost and Schedule Have Increased, and Further Facilities Planning Is Needed Statement of Michael J. Courts, Director, International Affairs and Trade

Testimony Before the Committee on Oversight and Government Reform, House of Representatives

For Release on Delivery Expected at 9:00 a.m. ET Thursday, July 9, 2015

GAO-15-755T

United States Government Accountability Office

Page 1 GAO-15-755T

441 G St. N.W. Washington, DC 20548

Chairman Chaffetz, Ranking Member Cummings, and Members of the Committee:

I am pleased to be here to discuss our work regarding the Department of State’s (State) construction efforts at the U.S. embassy in Kabul, Afghanistan. Since re-opening in 2002, the U.S. embassy in Kabul has experienced a dramatic increase in staffing, followed by a gradual drawdown. State has invested or plans to invest a total of $2.17 billion in its facilities in Kabul to address current and projected space needs in a difficult environment with constantly evolving security threats.

My testimony summarizes our May 2015 report on the status of construction at the U.S. embassy in Kabul.1 Like our May report, this testimony discusses (1) the extent to which construction cost and schedule have changed and why, (2) State’s use of temporary facilities on-compound, and (3) State’s planning for projected embassy facility needs. For our May 2015 report, we examined agency planning, funding, and reporting documents and interviewed officials from State’s Bureau of Overseas Buildings Operations (OBO), Bureau of Diplomatic Security (DS), and other offices. The review included fieldwork and associated follow-up in Kabul, Afghanistan throughout 2014. Additional details on our scope and methodology can be found in our May 2015 report.2 All of our work was performed in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Briefly, we found the following: First, contract costs have risen and schedule has been extended following State’s incomplete risk assessment, and further cost increases are likely. Second, State will continue using temporary facilities but lacks specific security standards for them, contributing to increased costs and extended schedules. And

1GAO, Afghanistan: Embassy Construction Cost and Schedule Have Increased, and Further Facilities Planning Is Needed, GAO-15-410 (Washington, D.C.: May 19, 2015). 2GAO-15-410.

Letter

Page 2 GAO-15-755T

third, lack of strategic facilities planning has led to challenges in addressing the embassy’s future facility needs. In our May 2015 report, we made recommendations to State to help address these issues which are discussed later in this statement along with State’s response.

As part of recent construction of Kabul facilities, in fiscal years 2009 and 2010, State awarded two contracts originally worth $625.4 million to meet growing facility requirements at the U.S. embassy in Kabul. Table 1 details the original scope of each contract.

Table 1: Scope of Work for 2009 and 2010 Kabul Embassy Construction Contracts at Time of Award

Fiscal Year 2009 Fiscal Year 2010 Awarded: September 30, 2009 Awarded: September 30, 2010 Awarded Amount: $209.4 million Awarded Amount: $416 million Requirements - design and construction of: office annex A apartment building 1 temporary offices and housing utility building warehouse addition other support buildings

Requirements - design and construction of: office annex B apartment buildings 2 and 3 expand apartment building 4 parking facilities other support buildings

Source: State | GAO-15-755T

Figure 1 depicts the compound upon completion of current construction.

Contract Costs Have Risen and Schedule Has Been Extended following State’s Incomplete Risk Assessment; Further Cost Increases Are Likely

Page 3 GAO-15-755T

Figure 1: U.S. Embassy Kabul, Compound upon Construction Completiona

aThis architect’s rendering is reflective of State’s current design.

State’s plans called for sequencing construction under the two contracts and also entailed acquiring the Afghan Ministry of Public Health site adjacent to the compound to build parking facilities for approximately 400 embassy vehicles. In September 2011, after State determined that the planned transfer of the Afghan Ministry of Public Health site would not happen, State removed the parking and vehicle maintenance facilities from the project. State also partially terminated elements of the first contract in September 2011—specifically one of the permanent office annexes and one of the staff apartment buildings—for the convenience of the U.S. government, in part, due to concerns about contractor performance and schedule delays. The 2009 contractor completed the temporary offices and housing units, but State transferred contract requirements for those permanent facilities not begun by this contractor to the 2010 contract, which increased cost and extended schedule.

The cost for the 2009 and 2010 contracts has increased by about 27 percent, from $625.4 million to $792.9 million (see table 2).

Page 4 GAO-15-755T

Table 2: 2009 and 2010 Kabul Construction Contract Costsa

Dollars in millions 2009 contract 2010 contract Total Contract award $209.4 $416.0 $625.4 Contract modifications ($121.4)b $288.90 $167.5 Total contract costs, as of March 2015 $87.9 $705.0 $792.9

Source: GAO analysis of State data | GAO-15-755T aTotals may not add because of rounding. bDecrease in contract costs is due to the partial termination of this contract—removing the permanent facilities—for the convenience of the U.S. government.

As of March 2015, OBO and the 2010 contractor were negotiating the value of several potential contract changes that will likely result in increased costs. For example, the contractor has asserted that site areas it needed were not available to start construction as planned. With regard to schedule, projected completion has been delayed over 3 years to fall 2017, although the 2010 contract had not yet been revised to reflect that date as of May 2015.3

We found that State did not follow its cost containment and risk assessment policies, resulting in lost opportunities to mitigate risks. The U.S. Office of Management and Budget (OMB) requires value engineering (referred to here as cost containment)4 for certain construction projects.5 In addition, OBO’s standard operating procedures require risk assessment studies to reduce and manage risks to a project.6

3Although the 2010 contractor’s delivery date to complete the project is currently July 2016, as of May 2015 State and the contractor continued to discuss potential contract changes that may affect contract schedule. 4Value engineering includes a systematic process of reviewing and analyzing a project for the purpose of achieving the lowest life-cycle cost consistent with required levels of performance, reliability, quality, or safety. The process is performed by a team of contractors and/or agency personnel. The process may identify recommendations for changes to plans, contracts, and other documents associated with the project. It is a well-established commercial practice that can help federal agencies reduce program and project acquisition costs, improve the quality and timeliness of performance, and take greater advantage of innovative approaches. 5OMB, Value Engineering, Circular No. A-131 (revised), Dec. 26, 2013, which superseded the 1993 edition of the circular in force in 2009 and 2010. 6OBO, OBO Risk Assessment Standard Operation Procedure, Mar. 7, 2005.

Page 5 GAO-15-755T

For the 2009 contract, State confirmed that it did not conduct either type of assessment. For the 2010 contract, State did complete a cost containment study and a risk assessment in March 2010.

The 2010 cost containment study made 31 recommendations to streamline construction and improve the project. State accepted 18, rejected 12, and partially accepted 1 of these recommendations.7 The risk assessment identified over 30 risks to the project. In particular, it identified the interface between the 2009 and 2010 contracts as a major source of risk. The study raised concerns about how State could best coordinate the 2010 contract with the 2009 contract without sufficient information about the first contractor’s design plans, which were under development. Examples of other major risks identified included (1) that adjacent Afghan Ministries of Public Health and Defense sites that State planned to acquire might not be available in time, or at all, to enable construction to proceed as planned, and (2) that there might be insufficient space for two contractors to stage construction concurrently.

The consultant responsible for the risk assessment recommended risk mitigation actions, which State did not act on, that aligned with the cost containment recommendations. For example, two of the recommendations were that State (1) facilitate greater project coordination between the two contracts, and (2) divide the 2010 contract into two separate contracts so that if the 2009 contract was delayed, the 2010 contract would not also be delayed.

One State official indicated that, given concerns about security in Kabul and pressure to get permanent, hardened facilities built as soon as possible, State was not going to act on any recommendation that would delay getting the contracts awarded and the facilities built. A senior State management official acknowledged that State did not fully follow its cost and risk policies, and said that had State more fully considered the cost containment and risk assessment study recommendations, there might have been a decision to delay award of the 2010 contract, which would have slowed efforts to provide facilities as quickly as possible. Several risks noted by that study eventually materialized, such as the loss of the Afghan Ministry of Health site and insufficient space that interfered with

7We did not assess the extent to which accepted recommendations were implemented by State.

Page 6 GAO-15-755T

the sequencing of construction. These factors contributed to increased cost and extended schedule. Thus, in our May 2015 report, we recommended that State ensure existing cost containment and risk assessment policies are followed in future Kabul construction projects. State concurred.

Since 2002, State has spent over $100 million to construct temporary facilities on the embassy compound to accommodate evolving staffing needs and provide temporary office and housing space as permanent facilities are built. OBO building guidance from 2009 states that “temporary facilities” are facilities that will be occupied for no more than 5 years or until a permanent building is constructed, whichever is sooner. The guidance also indicates that temporary facilities include, but are not limited to, containerized housing/office units, modular units, modified shipping containers, and trailers.8 On completing the project in 2017, all temporary facilities on-compound will be nearly 5 years old or more, and a smaller subset will be more than 10 years old. Based on numbers provided by State, those temporary facilities will likely consist of over a third of available desks and beds. State officials indicated that continued use of these temporary facilities is likely, as some may be used by contractors that will provide support services following the U.S. military’s drawdown. For more information, see appendix 1.

The lack of security standards for temporary facilities contributed to insufficient and differing levels of protection, increased costs, and extended schedule. Prior to building additional temporary facilities under the 2009 contract, State informed Congress in its fiscal year 2008 Supplemental Appropriations Justification of its concerns about threats posed from potential incoming weapons fire—amid increasing attacks around Kabul—and indicated that overhead protection was required to protect staff in existing temporary facilities on compound. Also, State security standards in 2009 indicated that housing constructed as an integral part of or adjoining the chancery (i.e., office building) should be constructed to meet chancery physical security standards.

State has physical security standards governing construction of offices and housing that State seeks to meet regardless of whether a facility is

8OBO, Building Innovation, October 2009.

State to Continue Use of Temporary Facilities but Lacks Specific Security Standards for Them, Contributing to Increased Costs and Extended Schedules

Page 7 GAO-15-755T

permanent or temporary. However, according to DS officials, State does not have security standards specifically tailored to temporary facility construction. For practical purposes, DS officials said that State’s physical security standards governing new construction—regardless of whether a facility is permanent or temporary—are standards that only permanent construction can meet. Where newly constructed temporary facilities—unlike newly constructed permanent facilities—cannot be constructed to meet all State’s security standards, State has the discretion to grant exceptions from those standards and to specify mitigating alternative security measures that will be provided.

In the absence of minimal security standards (or guidance) to guide planning for temporary facility construction, State inconsistently applied alternative security measures, resulting in insufficient and different levels of security between the temporary offices and housing. When awarding the 2009 contract, State did not specify that overhead protection was required for either the temporary housing or offices, even though State had previously expressed to Congress concerns about the threat posed from incoming weapons fire in 2008. Furthermore, the only security protection measure specified in the 2009 contract for the temporary housing was shatter-resistant window film. By comparison, temporary offices were to receive forced entry and ballistic protection. State subsequently took corrective action through modifications on the 2009 contract that increased cost and extended schedule. State likely paid more than it would have had the security requirements been included in the original contract requirements.

Thus, to address this issue, in our May 2015 report, we recommended that State consider establishing minimum security standards or other guidance for the construction of temporary structures, especially those used in conflict environments. State partially concurred. State does not support separate standards for temporary structures, reiterating that it aims to meet Overseas Security Policy Board security standards in all environments. Where this is not possible, State asserts it works to meet the intent of these standards through alternative security mitigation measures via its “waivers and exceptions” process. However, State commented that it does believe that there is value in documenting standard operating procedures and best practices associated with the deployment and protection of temporary structures in high-threat and conflict environments. State noted that while such documentation would not constitute security standards and would not circumvent risk management integral to its waivers and exceptions process, it would provide templates from which to base the design of future projects in

Page 8 GAO-15-755T

exigent environments. Should State produce such documentation, we believe that this could meet the intent of our recommendation.

As discussed in our May 2015 report, since the U.S. embassy in Kabul reopened in 2002, the unpredictable operating environment of Afghanistan has produced changing facility needs that have continually outpaced the post’s existing capabilities. This has been due to various factors such as policy and program changes, staffing fluctuations, and changes in the security environment. To meet these needs, State has made or plans to make approximately $2.17 billion in infrastructure investments in Kabul.9

During this time, the embassy has used a variety of off-compound facilities to meet some needs that could not be met on-compound. Key off-compound facilities include Camp Sullivan, a 20.9-acre property near Kabul International Airport; Camp Seitz, a 7-acre facility southwest of the embassy that serves as housing and office space for security contractors; and Camp Eggers, a 16.8-acre former Department of Defense (DOD) facility southwest of the embassy planned to serve as a contractor camp. In addition, State is upgrading Camp Alvarado, a property located near the airport that serves as the main aviation hub for the embassy’s air transport and counternarcotics operations. As of March 2015, these off-compound properties represented a total State investment of almost $731.4 million. The relative locations of these properties are shown in figure 2.

9For additional details on funding data, see GAO-15-410.

Lack of Strategic Facilities Planning and Policy Has Led to Coordination Challenges in Addressing Future Needs in Kabul

Page 9 GAO-15-755T

Figure 2: U.S. Embassy Kabul and Key Off-Compound Facilities

Page 10 GAO-15-755T

State plans to use $394.9 million to address unmet facility needs on- and off-compound in fiscal year 2015.10 State is also seeking future funding for additional facility investments, such as upgrading the remaining temporary facilities and constructing the parking facilities that State had to remove from the current project.

The post’s current facility needs stem primarily from changing circumstances inherent to the operating environment in Kabul. For example, when the Afghan Ministry of Public Health site became unavailable for construction, OBO was forced to remove the parking garage, vehicle maintenance facility, and fuel point from the current project. Although the post has a temporary vehicle maintenance facility and fuel point, it is located where apartment buildings 2 and 3 will be built and must be demolished. State has explored interim solutions to provide a temporary vehicle maintenance facility at off-compound sites, but a permanent location had not been identified as of May 2015.

Changes in the security environment in Kabul, including attacks against the compound in September 2011, have also affected post needs. For example, security concerns were a primary factor in DS and the post’s acquisition of the Camp Seitz and Camp Eggers, as this would allow, for example, the relocation of the Kabul Embassy Guard Force closer to the embassy.

The withdrawal of the U.S. military has also produced new needs for the post. For example, this has driven recent post requests for a medical trauma facility and helicopter landing zone, as well as past and future planned upgrades at Camp Alvarado. In addition, as of March 2015, State continued to develop a contract to replace support services such as food, fuel, medical, and fire protection previously provided by DOD. According to State, this transition will also require further infrastructure upgrades on-compound. State officials at the post noted that the future embassy needs will likely exceed the available space on-compound and will require prioritization of needs as well as high-level policy and management decisions on staffing presence.

State stakeholders in Washington and at the post are working to identify, prioritize, and address these facility needs through various coordination

10This funding is subject to completion of State’s congressional notification process.

Page 11 GAO-15-755T

meetings and working groups. However, State does not have a strategic facilities plan for Kabul that documents current and future embassy needs, comprehensively outlines existing facilities, analyzes gaps, provides projected costs, and documents decisions made. Lack of such a plan has inhibited coordination and undermined the continuity necessary to address the embassy’s emergent needs.

International Facility Management Association (IFMA), GAO, and OMB guidance recommend that an organization view all real property asset investments as a single portfolio with strategic linkages when determining the right mix of projects to undertake.11 IFMA describes a strategic facility plan as a 2- to 5-year facilities plan that contains a needs statement (i.e., mission need), analysis of all real property assets and their condition, analysis of gaps between needs and current capabilities, recommendations for new spaces or buildings, and facility cost projections. IFMA also indicates the plan should document findings to include expected timelines for implementation but allow for updates, as appropriate. Similarly, GAO and OMB capital planning guidance emphasize the importance of identifying current capabilities of real property assets, determining gaps between current assets and needed capabilities, deciding how best to meet the gap by identifying and evaluating alternative approaches, documenting decisions, and making updates as needed.12

State officials responsible for embassy management, facilities, security, and construction all cited the lack of an overarching plan as an obstacle to coordination intended to address emergent post needs. According to State officials in Kabul and Washington, coordination to address the embassy’s future needs is particularly difficult due to the large number of stakeholders in Kabul and in Washington. Additionally, the constant personnel turnover caused by the typical 1-year duty tours results in lack of continuity in decision making.

11IFMA is an international professional association that advances facilities management through professional credentialing of facility managers, research, and training. 12GAO, Executive Guide: Leading Practices in Capital Decision-Making, GAO/AIMD-99-32 (Washington, D.C.: Dec. 1, 1998). OMB, Capital Programming Guide, Supplement to Office of Management and Budget Circular A-11: Planning, Budgeting, and Acquisition of Capital Assets (July 2012).

Page 12 GAO-15-755T

Without a comprehensive plan that provides a strategic framework, the competing proposals of the post’s many stakeholders are difficult to manage, prioritize, and reconcile. Consequently, State has been challenged to efficiently address changing embassy needs in several instances on- and off-compound. Examples of those challenges include issues related to: (1) proposed projects conflicting with on-compound construction, (2) implementation of on-compound physical security upgrades, and (3) ineffective coordination of off-compound construction projects.13

When asked about strategic facilities planning, State officials provided a series of planning coordination tools as alternatives. These included OBO’s 2010 site master plan for the embassy compound and a 2014 draft update of that master plan. Although these tools did perform some coordination functions, they do not substitute for a strategic facilities plan.

OBO’s use of the term “master plan” created some false expectations among non-OBO stakeholders in Kabul and Washington. For example, officials from post and DS believed the 2014 master plan update would comprehensively identify the post’s needs and take into account all facilities—to include off-compound projects—when determining capabilities and alternatives for meeting those needs; instead, the update was limited to the compound. When OBO presented the 2014 Master Plan Update to the post in September 2014, post officials told OBO that the site plan did not address all of the embassy’s needs. In addition, they told us that limited space on-compound requires the continued use of off-compound facilities. OBO continues to work with stakeholders in Kabul and Washington to find ways to incorporate as many post needs on-compound as possible. While the 2014 Master Plan Update may eventually be used to inform a series of new construction projects, it remains a compound-specific document and does not address how embassy needs will be met at off-compound facilities in the interim. Thus, in our May 2015 report, we recommended that State develop a Kabul strategic facilities plan. State concurred.

From April 1990 through December 2013, OBO had a policy and procedures directive that required strategic facility planning (termed long-

13See GAO-15-410 for additional details.

Page 13 GAO-15-755T

range facilities plans) for posts meeting certain criteria.14 State documentation shows that between 2004 and 2008, OBO prepared 16 long-range facilities plans (strategic facility plans) for selected posts with challenging real property issues. In 2008, OBO’s then director also reported to State’s Undersecretary for Management that long-range facilities plans were essential precursors to the development of individual projects. However, OBO produced no long-range facilities plans after 2008.

In December 2013, OBO rescinded its long-range facilities plans policy and procedures directive based on an explanation that the office responsible for that function no longer existed and that the function had been replaced by master planning.15 However, the action did not indicate what master planning entailed within OBO, nor did it explain and justify how master planning could substitute for strategic facilities planning. OBO was unable to provide any current policy governing either post strategic facilities planning or site master planning. Without policies that clearly define strategic facilities planning and master planning, as well as outline the content and methods to conduct such planning, it will be difficult for OBO to fulfill these responsibilities. Therefore, in our May 2015 report, we recommended that State establish policy and procedure directives governing the definition, content, and conduct of post-wide strategic facilities planning and master planning. State concurred.

Chairman Chaffetz, Ranking Member Cummings, Members of the Committee, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time.

14OBO, Policy and Procedures Directive PPD 01, Long Range Facility Planning Program. These criteria included such things as significant staffing changes, need to collocate State and other agencies, political changes (e.g., post openings/closings,) security issues, and posts where a significant investment was to be made. 15According to OBO policy, a policy and procedures directive may be rescinded when replaced or superseded by a new directive or at the request of the proponent office. The responsible office must sufficiently explain and justify why the directive is no longer needed.

Page 14 GAO-15-755T

For further information about this testimony, please contact Michael J. Courts, Director, International Affairs and Trade at (202) 512-8980 or at courtsm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Leslie Holen (Assistant Director, International Affairs and Trade), Michael Armes (Assistant Director, Physical Infrastructure), David Hancock, John Bauckman, Eugene Beye, Mark Dowling, and David Dayton.

GAO Contact and Staff Acknowledgments

Appendix I: Temporary Facilities in Kabul, Afghanistan

Page 15 GAO-15-755T

Based on numbers provided by State, as of February 2015, temporary facilities on the embassy compound provided nearly 1,100 desks and 760 beds. Figure 3 shows some of the temporary facilities that the post has used to meet interim space needs.

Figure 3: U.S. Embassy Kabul, Temporary Facilities

Temporary office facilities that are to remain can provide space for 875 desks. By comparison, permanent office facilities (existing and newly constructed) in fall 2017 will provide 1,487 desks.

The number of temporary housing facilities that are to remain has not been finalized. The number of beds likely to remain within the temporary housing facilities will range from approximately 472 to 640 beds. By

Appendix I: Temporary Facilities in Kabul, Afghanistan

Appendix I: Temporary Facilities in Kabul, Afghanistan

Page 16 GAO-15-755T

comparison, 819 permanent beds will be provided within permanent apartment facilities (existing and newly constructed) upon construction completion.

(321075)

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STATEMENT BY

Gregory B. Starr

Department of State

Assistant Secretary for Diplomatic Security

BEFORE THE HOUSE OVERSIGHT AND GOVERNMENT REFORM

JULY 09, 2015

1

Chairman Chaffetz, Ranking Member Cummings, and distinguished

Committee members – Good Morning. Thank you for your invitation to appear

today to discuss security and construction developments at the U.S. Embassy in

Kabul, Afghanistan. Our efforts in Afghanistan and our determination to support

the Afghan government are of the highest importance to the Department and the

Administration. I, along with my colleagues at the Department of State, look

forward to working with you to examine these issues and illustrate how we are

collectively supporting the courageous men and women who serve at this mission

with safer, more secure facilities.

Our national interests sometimes require us to operate in very dangerous

places. We identify risks, and we take deliberate and prudent steps to mitigate

them. The Department has made important strides in that regard. I personally

discuss, plan, and strategize with my counterpart Director Lydia Muniz in the

Bureau of Overseas Buildings Operations (OBO) on at least a weekly basis,

usually more. We plan with a wide array of Department interlocutors, interagency

partners, and directly with the people managing security and construction projects

at the Mission in Kabul. However, we can never foresee or mitigate all the

potential pitfalls in an unpredictable environment like Afghanistan.

In Kabul’s high threat environment, hostile actors routinely target the U.S.

and other foreign nationals. Insurgents have employed a wide range of attacks,

including suicide operations, small arms fire, IEDs, assassination attempts,

mortars, insider threats, kidnappings, and complex attacks. Just last week there

was an attack near the compound, and like past attacks our facilities and security

measures performed as they should and protected our personnel.

In addition to operating in a challenging security environment and

geographic location, we have had our primary shipping and resupply route

impeded and closed for extended periods of time without notice. The closure

invariably slowed our ability to get materials to the site, but we ultimately found

alternative routes, and our mission never ceased. Embassy Kabul is not just a

construction site—it’s one of the largest functioning embassies in the world, with a

large number of direct hires and contractors, which require significant support

including housing, office space, and vehicles. Although we’ve experienced

periods of elevated and targeted violence which has halted all movement by

Embassy personnel, we have resumed movements and we continue to build.

2

When my colleague at the Office of Inspector General (OIG) has brought

issues and deficiencies to our attention, we have made changes in short order to

ensure mistakes are not prolonged or duplicated. We have learned lessons and

greatly improved operational efficiencies due to the thorough inspection of the

OIG as well as the GAO reports. We thank them for their contributions in helping

us improve our operations in Kabul and many places around the world.

Our facilities have proven time and time again that they can withstand the

most complex of attacks. Simply put: our physical security countermeasures work.

Building facilities in this environment is not easy and is certainly not without risks,

delays, and unforeseen circumstances and costs. Due to a fluid and evolving

security environment, we must evolve and adapt to the conditions and

circumstances presented to us. We work constantly to improve our practices and

protect our people. We continually re-evaluate; and at times, despite the inherent

setbacks it may cause, we must chart new courses, in order to advance the bigger

picture of completing the mission to secure our people.

As I close, I will say, I am both confident and pleased that despite the many

unforeseen challenges and setbacks, Department personnel in Kabul are better

prepared, protected, and secured. We look forward to working with Congress to

ensure that our people serving abroad, particularly in high threat environments,

have a safe platform for carrying out the conduct of diplomacy. I want to thank

Congress for the resources that you have provided over the years to strengthen and

reinforce this vitally important diplomatic platform. As the Assistant Secretary for

Diplomatic Security, I work every day with my colleagues in the Department of

State to ensure a safe environment for our people, and with your continuous

support, we are doing that. Thank you and I will be glad to answer any questions

you have.

1

Gregory B. Starr

Assistant Secretary for Diplomatic Security

Gregory B. Starr became Assistant Secretary of State for Diplomatic Security on November

18, 2013. In this capacity, Mr. Starr is in charge of the security and law enforcement arm of

the U.S. Department of State.

Diplomatic Security is responsible for providing a safe and secure environment for the

conduct of U.S. foreign policy throughout the world. Mr. Starr leads a force of Special

Agents, Diplomatic Couriers, Security Engineering Officers, Security Technical Specialists,

general service staff, and other specialists.

He previously served as Director of the Diplomatic Security Service from April 2007 until his

retirement in May 2009. He returned to Diplomatic Security on February 1, 2013 as Principal

Deputy Assistant Secretary for Diplomatic Security, Director of the Diplomatic Security

Service, and acting Assistant Secretary.

From May 2009 until January 2013, Mr. Starr served as United Nations Under-Secretary-

General for Safety and Security. In that capacity, he oversaw the formulation of security

policies and the implementation of programs to ensure the conduct of activities in a secure

environment at U.N. headquarters and overseas locations around the globe.

Other domestic assignments for Mr. Starr have included Deputy Assistant Secretary of State

for Countermeasures (2004-2007), the Director of the Office of Physical Security Programs

(2000-2004), Division Chief for worldwide local guard and residential security programs

(1995-1997), and assignments to the Secretary’s detail, technical security operations, and the

New York Field Office.

His overseas assignments have included Senior Regional Security Officer at the U.S.

Embassy Tel Aviv (1997-2000), as well as Senior Regional Security Officer position in Tunis,

Tunisia and Dakar, Senegal; and was assigned to the Regional Security Office in Kinshasa,

Zaire (presently the Democratic Republic of the Congo).

Mr. Starr is the recipient of Department of State awards including Senior Foreign Service

Performance awards, and Superior and Meritorious Honor awards. He began his career as a

Special Agent in July 1980 and joined the ranks of the Senior Foreign Service in 2001. Before

his retirement from the U.S. Department of State in 2009, Mr. Starr held the rank of Minister

Counselor in the Senior Foreign Service.

2

A New York native, Mr. Starr received a Bachelor of Arts degree in Political Science and a

Masters degree in Forensic Science from the George Washington University.

“CONSTRUCTION COSTS AND DELAYS AT THE U.S. EMBASSY IN KABUL”

STATEMENT BY AMBASSADOR DONALD S. HAYS

SENIOR INSPECTOR, OFFICE OF INSPECTOR GENERAL FOR THE DEPARTMENT OF STATE

AND THE BROADCASTING BOARD OF GOVERNORS

BEFORE THE COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

UNITED STATES HOUSE OF REPRESENTATIVES

JULY 9, 2015

1

Chairman Chaffetz, Ranking Member Cummings, and Members of the Committee: Thank you for inviting me to testify on behalf of the Office of Inspector General (OIG) for the Department of State (Department) and the Broadcasting Board of Governors regarding the inspection of Embassy Kabul in Afghanistan. My testimony will focus on construction projects and related security issues at the embassy. I. EMBASSY KABUL

The embassy is a fortified compound composed of two adjacent campuses located in the center of the city. These two campuses total 36 acres and have a mixture of completed structures, temporary offices, temporary housing facilities, and construction sites. The Department leases several residences outside the embassy walls to provide adequate setback for enhanced security of those sections of the wall. The Afghan Ministry of Interior borders the embassy to the east, and the multi-storied Kabul Hotel is north of the embassy. To the south of the embassy is the International Security Assistance Force compound. At the time of our inspection, over 1,000 U.S. Government employees were stationed in Afghanistan, and approximately 4,500 contractors were working in support of the embassy throughout the country. Due to the massive construction underway at the embassy compound, employees were forced to weave their way between their temporary housing areas through various construction sites to get to work. A number of agencies were in temporary facilities awaiting the completion of new offices. II. OIG INSPECTION

The inspection took place between February 2 and March 11, 2014. A team of 21 inspectors conducted over 600 interviews and reviewed hundreds of documents, including 70 oversight reviews1 on various aspects of the Afghan mission.2 When we arrived, the security situation was deteriorating in and around Kabul, necessitating additional security projects in Kabul and throughout the country. The team found that the Bureau of Overseas Buildings Operations (OBO) and the Bureau of Diplomatic Security (DS) were engaged in constructing a number of building projects both on and off the embassy compound. During our inspection, OBO reported that it had spent over $1.35 billion between FYs 2002-2013, some of which had been contributed by other bureaus, for embassy related construction and physical security projects. These projects included expansion of the warehouse and the Marine Security Guard quarters, the building of two new hardened office buildings, and construction of a new housing facility. Other projects, in Kabul outside the embassy compound, included the completion of contract guard sleeping quarters, a facility for the embassy’s fire department, a motor maintenance facility, and additional warehouse facilities.

1 The reviews included those issued by the Special Inspector General for Afghanistan Reconstruction, GAO, and OIG since 2010. 2 Inspection of Embassy Kabul, Afghanistan (ISP-I-14-22A, August 2014), https://oig.state.gov/system/files/231107.pdf.

2

The Need for Security Enhancements to Exterior Walls and Temporary Housing

The need for security enhancement to the exterior walls was first identified and funded by DS in 2009.3 DS considered these enhancements urgent given the embassy’s location in the middle of Kabul, the large buildings adjacent to the compound, and the growing security threat. The team made classified recommendations regarding these security enhancements. Necessary security enhancements to the temporary housing were similarly characterized as urgent—and funded—by DS in 2011. Approximately 70 percent of the 800 U.S. Government employees and contractors working and living on the U.S. embassy compound were housed in temporary containerized housing units (CHUs) at the time of the inspection, and most of these lacked adequate overhead and or side-cover protection. This issue also was the subject of a recommendation in the classified annex of our report. Lack of Coordination Between the Bureaus of Diplomatic Security and Overseas Buildings Operations

During the course of the onsite inspection, both the embassy’s senior management team and the OIG team expressed concern about OBO’s lack of progress on security improvements to the exterior walls and temporary housing. Although DS designated funding for these enhancements, they were not initiated despite the serious implications of not completing them. Based on the interviews conducted by the OIG team, this issue caused considerable friction between DS and OBO. Specifically, DS wished to expeditiously complete these projects while OBO stated that it wanted to proceed with these projects only after the designs met international construction and safety standards. During the inspection process, the team raised its concerns with OBO about the need for the enhancements. In response, OBO’s project manager explained that there was a lack of progress due to a number of factors, including the number of projects underway and the limited space available for construction material and equipment on the compound. As a result, the contractor stated that it was required to phase in projects in order to work efficiently and safely. The project manager stated that despite a desire for enhanced security involving the compound walls and the temporary housing, there was no way to carry out those enhancements until the current construction projects were completed.4 Upon our return to Washington, the inspection team raised its concerns about the apparent inability of DS and OBO personnel to work together and to find immediate solutions to these and

3 DS transferred $15 million to OBO in 2009, $18 million in 2011, and $27.5 million in 2012. 4 According to OBO, the current projects included construction of new office and apartment buildings, a warehouse extension, and an expansion of the Marine Security Guard residence. OBO said these will not be completed until 2017 at the earliest.

3

other security issues in Kabul. Team members met with the Director of OBO and the Assistant Secretary for DS on several occasions. They stated that they would increase coordination and work together to address this situation. Subsequently, the OBO Director established a senior OBO working group to work with DS to address urgent security related projects. In a follow-on meeting between the OIG team and the Under Secretary for Management, the Under Secretary assured the team that high-level meetings would be conducted to eliminate outstanding issues and to proceed with the team’s recommended security enhancements. In our unclassified report, under the section titled “Construction Project Management,” we recommended that OBO coordinate with DS and the embassy to develop and execute a master plan for all ongoing and planned projects, including those funded by DS. To date, that recommendation remains open and serious concerns remain. II. CURRENT SITUATION

In a May 22, 2015, Consular Travel Warning for Afghanistan, the Department notes:

Extremists associated with various Taliban networks and members of other armed opposition groups are active in every province of the country. Despite numerous security operations and checkpoints by Afghan and coalition forces in and around the capital, Kabul is at high risk for militant attacks, including vehicle-borne improvised explosive devices (VBIED), direct and indirect fire, and suicide bombings. Travel to all areas of Afghanistan remains unsafe due to ongoing military combat operations, land mines, banditry, armed rivalry between political and tribal groups. The Taliban are now active in all major cities in Afghanistan.

However, despite the continuing security threat, OIG currently is unaware of any contracts being let for security enhancements to either the exterior walls or the temporary housing used by U.S. Government employees and contractors.

###

Donald S. Hays Ambassador Hays is a senior inspector with the Office of Inspector General (OIG) for the Department of State and the Broadcasting Board of Governors. He joined OIG in January 2010. Mr. Hays served in the U.S. Army from 1967 to 1970, with a tour in Vietnam (1968–1970). He then joined the Foreign Service in 1973, serving in Vietnam, the former Soviet Union, Sierra Leone, Senegal, and Germany. He also served in the Department in the Secretariat as Executive Director of the Office of Medical Services and later of the Bureau of European and Canadian Affairs. He then served as Director of the Office of Management Policy. In 1999, Mr. Hays was appointed Ambassador for United Nations Reform at the U.S. Mission to the United Nations. Following that tour, he was seconded to the Office of the High Representative in Bosnia and served as the senior deputy high representative for 4 years. He finished out his career on assignment to the U.S. Institute of Peace. Mr. Hays has been awarded the President’s Award for Distinguished Federal Civilian Service, two Department Distinguished Honor Awards, and four Superior Honor Awards. While in the military, he also received two Bronze Stars, an Army Commendation Award, and an Air Medal for his service in Vietnam. Mr. Hays received his B.A. from the University of California, Santa Barbara, and attended postgraduate studies at Georgetown University and the Department’s senior training at Princeton. Mr. Hays retired from the Foreign Service in 2006.

Testimony of Jarrett Blanc

Principal Deputy Special Representative for Afghanistan and Pakistan

Before the House Committee on

Government Oversight and Reform

July 09, 2015

Chairman Chaffetz, Ranking Member Cummings, Members of the

Committee, thank you for the opportunity to appear before you today to discuss the

future of Mission Afghanistan with my colleagues Lydia Muniz of Overseas

Buildings Operations and Greg Starr of Diplomatic Security.

Please allow me to begin once again by thanking the members of the

Committee for your continued support for our mission. The American people have

been generous, steadfast, and brave in supporting Afghanistan. I would

particularly like to honor again the dedication of thousands of American military

personnel, diplomats, and assistance professionals who have served – and continue

to serve – in Afghanistan.

We began our mission in Afghanistan in late 2001 to ensure that that country

would never again be used by al Qaida and other extremists as a haven from which

to launch attacks against U.S. territory, citizens, or interests overseas. History has

taught us the terrible consequences of inattention and disregard, and we must not

repeat our past mistakes. Since 2001, our goal has been to foster the development

of an Afghanistan that is sovereign, unified, democratic and increasingly self-

sufficient, both economically and militarily – in short, the development of

Afghanistan as a capable partner in our efforts to combat al Qaida and other

extremists who threaten the United States and our allies. We cannot achieve this

without smart diplomacy and, by necessity, the presence in Afghanistan of U.S.

diplomats and development professionals.

Afghanistan is undeniably a dangerous place for U.S. diplomats, and we

understand the risks associated with our working there. When we ask our people –

our friends and colleagues – to go into harm’s way, we do so because their work is

vital to our national security, and we are all of us obligated to provide them with

the resources they need to do their jobs safely and well. Understanding this, the

Department of State, with support from the Congress, has made significant

investments to make Embassy Kabul the safest, most effective platform possible to

carry out our goals, and we will continue to make improvements to adapt to a

variable political, security, and planning environment. Ongoing construction and

security upgrades – based on our best estimate of longer-term political and security

challenges – will create an embassy compound that is designed to minimize threats

and sustain U.S. diplomacy. Before the end of 2017, we expect to complete

construction on several projects that will provide new, hardened office space and

living quarters to accommodate permanent staff. In keeping with President

Obama’s plan for a phased drawdown of U.S. military forces and a normalization

of the diplomatic footprint to an Embassy-based presence, we are executing an

options-based contract for life-support services that will reduce our dependence on

Department of Defense support and increase our flexibility and self-sufficiency.

We are bringing satellite locations that house and support the Kabul Embassy

Security Force (KESF) closer to the main compound, installing advanced early-

warning technologies, and enlarging facilities for our threat prevention and

response teams. We continue to work with our Afghan partners to assess emerging

threats and develop effective prevention strategies.

Of course, none of these measures is perfect. While we constantly examine

our security methods to adapt to an evolving threat environment, I want to be clear

that no amount of setback or security programming will ever entirely eliminate the

risk our personnel face while serving in Afghanistan. We will continue to

scrutinize the environment in Afghanistan and our security footing to seize

opportunities to improve security when possible. We have demonstrated an ability

to be flexible as diplomats – surging our civilian staff to support the military

footprint, and now drawing down to a smaller and more sustainable level,

including by closing our presences outside of Kabul. To be effective, the

business of diplomacy must be conducted in person. The men and women of

Mission Afghanistan engage closely and continuously with Afghan institutions and

actors at all levels. The reporting they provide is vital to informing an extensive

interagency process that determines long-term U.S. strategy. They build

relationships with Afghanistan’s current and future leaders, making certain that

U.S. policymakers remain well-informed and that our positions are heard. They

oversee one of the United States’ largest assistance relationship, safeguarding

billions of taxpayer dollars. This work is critical to our efforts to fight al-Qaida,

assist the Afghan Government against the Afghan insurgency, and bolster the

legitimacy and durability of the Afghan state.

Since the attacks on September 11, 2001, we have made significant progress

in degrading al Qaida’s operational capacity in Afghanistan and Pakistan. U.S.

diplomacy has helped the Afghan government build a national army, a police

force, and professional institutions to provide improved security, education, and

opportunity for millions of Afghans. We have seen the country make great strides

in expanding its democratic institutions, culminating recently in the first

democratic transition of power in Afghanistan’s history. But many challenges

remain. Democratic institutions must be further strengthened so that the fledgling

government can continue to gain legitimacy. A once booming economy has slowed

and must be reinvigorated through domestic innovation and international

investment. And Afghanistan’s ability to provide a self-sufficient security

apparatus must be bolstered in order to face persistent threats and remain a capable

partner in counterterrorism operations and a responsible regional actor. Fostering

Afghanistan’s development is the only sustainable way to address U.S. security

concerns in the region, and addressing these remaining challenges will require

continuing assistance and intensive day-to-day diplomatic engagement. We will

continue to find ways to address the real risks our team in Afghanistan faces while

still performing this critical engagement.

Jarrett Blanc is Deputy Special Representative for Afghanistan and Pakistan. He

has served in this role and as Senior Advisor to the Special Representative since

2009.

Prior to joining the State Department, Blanc was the Senior Policy Analyst for

Multilateral Affairs at the Open Society Institute. He has worked for the U.N. and

others advising senior decision-makers on conflict termination and political

transitions. He managed the first elections in Iraq and other complex infrastructure

and governance operations in conflict and post-conflict areas such as Afghanistan,

Kosovo, the Palestinian Authority, Lebanon, and Nepal.

Blanc has been a Council on Foreign Relations International Affairs Fellow, a

Visiting Scholar at the U.S. Institute of Peace, and an adjunct professor at George

Washington University. He has published a number of articles and book chapters

and has lectured at West Point, Harvard, Princeton, and the Scuola Superiore

Sant’Anna. Blanc holds and A.B. from Harvard University and an M.S. in

Environmental Science and Policy from Johns Hopkins University.

1

STATEMENT BY:

Michael L. Gulino

President and Chief Executive Officer

AEGIS DEFENSE SERVICES LLC

PROVIDED TO:

The House Committee on Oversight and

Government Reform

Hearing on Construction Costs and

Delays at the U.S. Embassy in Kabul

July 9, 2015

2

Introduction

Chairman Chaffetz, Ranking Member Cummings and Members of the Committee: thank you for the

invitation and the opportunity to present testimony before this Committee. I am pleased to represent

Aegis and all of our employees worldwide on this matter.

As a brief introduction, Aegis Defense Services LLC is a U.S. company headquartered in McLean,

Virginia, and is a subsidiary of the worldwide Aegis Group. We are a security and risk management

company whose focus is to provide the necessary support to enable our clients to undertake their work

activities in complex and high-threat operational environments. We handle everything from

protective security to the facilities that house, feed, and train our employees and canines. We employ

some 1,400 people, most of whom are performing critical roles in Afghanistan. Our team of

dedicated professionals includes employees from 47 of the 50 United States as well as foreign

national employees from Nepal and Afghanistan.

Aegis is committed to providing premier security and risk management services in support of U.S.

Department of State and U.S. Department of Defense missions, protecting people, facilities and

mission critical resources in Kabul and Kandahar Afghanistan. Beginning in 2012, under Task Order

10 to our Worldwide Protective Services (“WPS”) Contract, Aegis has worked in close coordination

with our customer, the U.S. Department of State, to meet all operational and contractual requirements

and ensure the success of the Kabul Embassy Security Force (“KESF”) Program.

2014 OIG Report

As the Committee knows, under the authority of the Inspector General Act of 1978, as amended, the

Department of State’s Office of the Inspector General (“OIG”) initiated an audit of the WPS Task

Order 10 in Kabul. The audit covered the start-up period of the contract. We acknowledge that there

were some administrative and logistical issues in the early part of the contract.

Since that time, and well before the issuance of the OIG Report, Aegis has worked in concert with the

U.S. Department of State to address and correct administrative and logistical issues that arose during

that early period in the Program, including ensuring complete and reliable processes and

documentation for record-keeping, employee vetting and time card and billing administration.

Notably, when Aegis commenced operations under Task Order 10, it took over an existing program

that was not under the same stringent standards as required by the WPS program. This required

additional training and integration efforts.

The OIG Report also noted that Aegis retained Third Country Nationals passports during visa

processing and did not post Trafficking in Persons (“TIPs”) notices in native languages. Aegis

maintains a vigilant human rights and TIPs compliance program. Aegis has refined its work permit,

visa and passport tracking to record when passports are submitted and released for the acquisition of

mandatory visas required to work as well as enter and exit the country. Aegis publishes the status of

all passports being processed in the Project Weekly Update to ensure that employees are aware of

their passport status. Aegis has ensured that TIPs posters in English and Nepali are displayed in the

appropriate common areas.

As part of its management model, Aegis leverages continuous improvement and operates pursuant to

reliable processes and controls that have addressed and overcome the early program issues noted by

the OIG.

3

PSC-1 Standard

Given the critical role that contractors have assumed in support of the U.S. government’s missions

in Afghanistan, Aegis strongly supports the efforts of the Committee and other government and

non-government organizations that are working to improve the accountability and performance of

contracting operations abroad.

In accordance with this view, Aegis maintains a strong corporate culture focus on setting and

adhering to the highest possible professional and ethical standards: Integrity—maintaining absolute

commitment to transparency and compliance; Reputation—ensuring respect, professionalism, and

promoting the client’s best interest; Compliance—as an industry leader, complying with and

enhancing industry regulations and standards. These tenets are the foundation of our industry

leadership in the development of private security firm universal standards and regulations, including

the International Code of Conduct for Private Security Providers and the PSC-1 management

standard.

Aegis worked closely with the DoD, DoS and the international community to establish the PSC-1

standard for the compliance and professional management of private security providers. Through our

PSC-1 Quality Management System (“QMS”), Aegis ensures the utilization of industry-leading

compliance standards and best practices, including legal and regulatory compliance; leadership

development and training; risk management; recruiting, vetting, and screening; rules for the

use/escalation of force; and the vigilant protection of human rights. Aegis was the first U.S. private

security firm to earn its PSC-1 certification through a vigorous external and independent audit

process.

Our employees and representatives also abide by our Aegis Code of Business Conduct, which further

ensures a workforce culture and commitment to respect, responsibility, diversity and inclusion. We

maintain stringent anti-corruption and whistle-blowing policies, as well as a policy of zero tolerance

of retaliation against employees who report violations and/or concerns regarding company policies,

laws or regulations. Finally, Aegis maintains robust business systems and controls to ensure

compliance with all regulatory and contract requirements.

Conclusion

I would like to thank the Committee for the opportunity to participate in this discussion and to thank

the U.S. Department of State for the opportunity to support its critical operations in Afghanistan. I

would also like to take this opportunity to extend my appreciation, on behalf of the Aegis

management team, to all Aegis men and women for their continued bravery, professionalism, high

standards, and exceptional work ethic and dedication in support of the U.S. government’s mission.

Aegis is proud to support the critical mission of ensuring the safety of our personnel, facilities and

resources abroad and look forward to participating in a continuing dialogue with the Committee

today.

Thank you. I will be pleased to answer any questions that any members of this Committee may have

at the appropriate time.

Michael Gulino

President & Chief Executive Officer

Michael L. Gulino is the President & CEO of Aegis Defense Services, LLC. Mr. Gulino brings

with him over 40 years of experience in the defense and national security sectors. Mr. Gulino

assumed the role of President & CEO after serving as LLC's non-executive Chairman for the

previous twelve months. Prior to joining Aegis LLC, Mr. Gulino served as Chief Development

Officer at ITT Defense, a leading U.S. provider of defense, security, and support services.

From June 2008 through May 2011, Mr. Gulino was President and General Manager of ITT

Mission Systems. Mr. Gulino initially joined ITT at the beginning of 2006 as Vice President and

Director of Business Development for ITT Mission Systems.

Prior to joining ITT, Mr. Gulino was President and Chief Operating Officer of VT Griffin

Services. Prior to joining VT Griffin, Mr. Gulino was President of Complete Building Services,

a division of The Donohoe Companies, where he successfully forged the company's entry into

the Federal Government market. Mr. Gulino’s initial career began after graduate school with

PAE Government Services in the Far East where he served in a number of management

capacities on a 28,000 employee Department of Defense contract before being transferred to

Washington, D.C.

Mr. Gulino holds a BA degree in Psychology and an MBA in Management, both from Western

Michigan University. He is a member of numerous defense industry organizations and

associations and has served as Chairman of the Contract Services Association, which was

merged into the Professional Services Council in 2008. Mr. Gulino was presented with the

Contract Services Association Member of the Year award for his efforts connected with

obtaining a legislative change related to severance pay for Foreign Nationals.

Committee on Oversight and Government Reform Witness Disclosure Requirement —"Truth in Testimony"

Required by House Rule XI, Clause 2(g)(5)

Name: Michael L. Gulino, President and Chief Executive Officer, Aegis Defense Services, LLC

1. Please list any federal grants or contracts (including subgrants or subcontracts) you have received since October I, 2012. Include the source and amount of each grant or contract.

None.

2. Please list any entity you are testifying on behalf of and briefly describe your relationship with these entities.

Aegis Defense Services, LLC. Michael Gulino is the President and Chief Executive Officer.

3. Please list any federal grants or contracts (including subgrants or subcontracts) received since October 1, 2012, by the entity(ies you listed above. Include the source and amount of each grant or contract.

Grants awarded after October 2012: None

Contracts awarded after October 2012:

(I) Worldwide Protective Services (WPS) Contract, Kabul Embassy Security Force (KESF) Task Order 10—U.S. Department of State; Contract No. SAQMMAIOD0094, TO 2011-010; $1,017,106,107 total value; 15 Jun 2012 — 17 Jun 2014 period of performance (Base and 4 Option Years).

Note: Aegis was awarded Option Year 3 on 15 June 2015.

(2) Kandahar Airfield Private Security Services Contract—U.S. Department of Defense; Contract No. W9 I B4L-15-C-0001; $8,368,236 total value; 22 Nov 2014 — 22 Aug 2015 period of performance

I certify that the above information is true and correct. Signature: Date: