Report Contents
What OIG Audited
In September 2011, the Bureaus of Overseas Buildings Operations (OBO) and Administration contracted with Caddell Construction, Inc. (Caddell), to build the New Office Annex (NOX) and Staff Diplomatic Apartment-1 (SDA-1) at the U.S. Embassy in Kabul, Afghanistan. OBO is responsible for overseeing the commissioning process, verifying that buildings are substantially complete, and ensuring that the turnover of the buildings to the post Facility Manager and transition to occupancy are efficient. The commissioning process focuses on verifying and documenting that building systems operate within the functional performance guidelines, as required by the contract. Buildings are deemed substantially complete when only minor items remain to be completed and it has been determined that those minor items will not interfere with occupancy. Following substantial completion, the buildings are occupied and turned over to the post Facility Manager, who assumes responsibility for operations and maintenance (O&M) of the facility.
OIG conducted this audit to determine whether OBO followed Department of State (Department) policies, procedures, and directives governing the commissioning, substantial completion, and turnover of the NOX and SDA-1 at the U.S. Embassy in Kabul.
What OIG Recommends
OIG made 10 recommendations to OBO to address identified deficiencies in its oversight of the commissioning, substantial completion, and turnover of the NOX and SDA-1. On the basis of OBO’s response to a draft of this report (see Appendix D) OIG considers three recommendations resolved pending further action and seven recommendations unresolved. A synopsis of OBO’s comments and OIG’s reply follow each recommendation in the Audit Results section of this report. OIG’s reply to OBO’s general and technical comments are presented in Appendix E.
What OIG Found
OIG found that OBO’s oversight of commissioning, substantial completion, and turnover of the NOX and SDA-1 was inconsistent with Department policies, procedures, and directives. The OBO Project Director in Kabul declared both buildings substantially complete and proceeded with occupancy before a number of key project milestones had been met. For example, even though OBO policies state that commissioning of all major building systems must be done before a project is declared substantially complete, OIG identified 25 systems that were not fully commissioned in one or both buildings prior to the declaration of substantial completion. The failure to complete the commissioning process occurred because of a combination of factors, including fundamental disagreements between the OBO Project Director in Kabul and the Commissioning Agent regarding the readiness of the systems in question, ambiguous OBO guidance as to which systems must be commissioned prior to substantial completion, and the fact that the Commissioning Agent is subordinate to the Project Director and, thus, the Project Director has ultimate authority over the commissioning process. These factors enabled the OBO Project Director to exercise his discretion to declare the buildings substantially complete notwithstanding the opinion of the Commissioning Agent. The decision to accept the buildings without completing the commissioning process, in turn, contributed to a range of building deficiencies after occupancy described in previously issued OIG reports.
In addition, OBO did not ensure that Caddell or the Commissioning Agent prepared and submitted key project documents before substantial completion and occupancy. For example, OBO did not require Caddell to prepare and submit Owner’s Project Requirements or Basis of Design documents, both of which are needed to determine whether the contractor fulfilled project requirements. Furthermore, OBO did not follow established procedures or best practices in planning for the buildings’ turnover from OBO’s Office of Construction Management to the post Facility Manager. For example, according to OBO procedures and directives, O&M deliverables, such as system manuals and as-built drawings are to be provided to the post Facility Manager at or before substantial completion. However, because OBO did not include phasing requirements in the contract modification for the NOX and SDA-1, a number of key O&M deliverables were not, in fact, required to be provided when the OBO Project Director declared each building substantially complete. As a result, Facility Management personnel were not fully prepared to accept responsibility for O&M of the NOX and SDA-1 following substantial completion and occupancy.
Report Terms
Report Recommendations
OIG recommends that the Bureau of Overseas Buildings Operations issue a Construction Alert defining which building equipment and systems must be fully commissioned prior to substantial completion and update its Policy and Procedures Directive for the Commissioning and Transition to Occupancy of Overseas Facilities (P&PD CM 01) to include those requirements.
OIG recommends the Bureau of Overseas Buildings Operations require project directors to certify that all required building equipment and systems are fully commissioned prior to issuing the certificate of substantial completion.
OIG recommends that the Bureau of Overseas Buildings Operations establish and implement internal controls to verify that all required documentation in support of commissioning testing is completed prior to substantial completion. This should include all pre-functional checks, functional performance tests, and integrated systems tests to ensure that building equipment and systems are functioning as intended.
OIG recommends that the Bureau of Overseas Buildings Operations move responsibility for oversight and management of commissioning agents from the Office of Construction Management to the Office of Facility Management. Specifically, the Office of Facility Management should oversee all aspects of the commissioning process, including (a) ensuring that commissioning agents have fulfilled the terms outlined in the statement of work; (b) verifying that all building systems are designed, installed, and tested to meet the Department’s contract requirements; and (c) ensuring that commissioning of all major systems is done before the project is declared substantially complete.
OIG recommends that the Bureau of Overseas Buildings Operations update its Policy and Procedures Directive for the Commissioning and Transition to Occupancy of Overseas Facilities (P&PD CM 01) to include procedures for identifying and approving instances in which it is appropriate to issue the certificate of substantial completion before commissioning has been fully completed. Specifically, these protocols should include mechanisms that (a) require a formal waiver be issued by the construction executive to proceed with substantial completion and occupancy even though commissioning is not yet complete, (b) establish milestones for completing the commissioning process after substantial completion and occupancy, and (c) execute a contract modification requiring the contractor to grant an extended warranty for those systems that were not commissioned at the time of substantial completion.
OIG recommends that the Bureau of Overseas Buildings Operations update its Policy and Procedures Directive for the Commissioning and Transition to Occupancy of Overseas Facilities (P&PD CM 01) as well as its Guide to Excellence in Diplomatic Facilities to ensure that references to the commencement of the warranty period are consistent with FAR 52.246-21, Warranty of Construction. Specifically, existing policies and procedures should be updated to indicate that the warranty period either begins at final acceptance unless the Government takes possession of any part of the work before final acceptance, in which case, the warranty shall begin at the date the Government takes possession. The Bureau of Overseas Buildings Operations should also explicitly define when the Government officially takes possession of the completed work, including whether possession occurs at substantial completion or at the time of occupancy.
OIG recommends that the Bureau of Overseas Buildings Operations establish requirements in its Policy and Procedures Directive for the Commissioning and Transition to Occupancy of Overseas Facilities (P&PD CM 01) for the preparation and submission of key project documents for newly constructed facilities, including (a) owner’s project requirements, (b) a Basis of Design document, (c) systems manuals, (d) a commissioning plan, and (e) a final commissioning report. These documents should be prepared and submitted at the appropriate interval of construction for each building or facility constructed by the Bureau of Overseas Buildings Operations. Additionally, the requirements should indicate the parties responsible for preparation, review, and approval of each of the key project documents.
OIG recommends that the Bureau of Overseas Buildings Operations update its Policy and Procedures Directive for the Commissioning and Transition to Occupancy of Overseas Facilities (P&PD CM 01) to require its project directors and facility managers to establish a memorandum of agreement 9 months prior to the estimated substantial completion target date to facilitate the building turnover process. This memorandum of agreement should, at a minimum, (a) define the type of access that Facility Management personnel and operations and management contractors should be given to new buildings prior to substantial completion; (b) specify relevant documentation, such as punch lists, lists of equipment to be maintained, and commissioning documentation that should be provided to facility managers and operations and management contractors; and (c) establish timelines for providing building access and documentation to facility personnel and operations and management contractors prior to substantial completion and occupancy.
OIG recommends that the Bureau of Overseas Buildings Operations update its Policy and Procedures Directive for the Commissioning and Transition to Occupancy of Overseas Facilities (P&PD CM 01) to require its project directors and facility managers to hold a pre-turnover meeting approximately 60 days prior to substantial completion. The entire project team should be included in this meeting with participants discussing the status of construction, commissioning, required turnover documentation, and the planned schedule and outstanding actions required to ensure a smooth and successful turnover of facilities.
OIG recommends that the Bureau of Overseas Buildings Operations develop requirements mandating the use of a phased approach for projects that involve the construction of multiple buildings or facilities. This approach should outline specific phasing requirements for each building or facility constructed, including separate and distinctive commissioning, substantial completion, turnover, and acceptance requirements. This approach should also include protocols for a phased operations and management turnover process, requiring the contractor to provide key operations and management deliverables at the completion of each building if multiple buildings or facilities are being constructed under a single Bureau of Overseas Buildings Operations construction contract.