Report Contents
What OIG Audited
In September 2014, the Department of State (Department) awarded Caddell Construction Co., LLC (Caddell), a $196 million contract to design and construct a New Embassy Compound (NEC) in Ashgabat, Turkmenistan. The Turkmen Government imposes a “red line” concept that requires constructed buildings in Ashgabat to be set back a certain distance from the road to ensure an aesthetic alignment. The NEC construction project, which is managed by the Bureau of Overseas Buildings Operations (OBO), was initially scheduled to be completed in July 2018. In June 2019, the Office of Inspector General (OIG) learned of circumstances that affected the construction of the New Office Building (NOB), which was intended to serve as the embassy’s chancery, and is one of 13 NEC buildings being constructed. OIG initiated this review to determine the genesis of the delays encountered in constructing the NEC, the status of efforts to complete construction of the NOB, and the operational and financial implications of the delays on both the Department and U.S. taxpayers.
What OIG Recommends
OIG made eight recommendations to the Undersecretary for Management and OBO to address the deficiencies identified in this report. On the basis of the Under Secretary for Management’s and OBO’s response to a draft of this report, OIG considers all eight recommendations resolved, pending further action. A synopsis of the Department’s responses to the recommendations offered and OIG’s reply follow each recommendation in the Review Results section of this report. The Department’s responses to a draft of this report are reprinted in Appendices B and C.
What OIG Found
The genesis of the delays encountered completing the construction of the NEC in Ashgabat is attributable to complications associated with the construction of the NOB. Specifically, in July 2016, the Government of Turkmenistan halted construction of the NOB because it was being constructed in a location that violated the city’s red line. This error occurred, in part, because OBO personnel failed to follow internal procedures that guide the planning of construction projects. Specifically, the OBO project managers overseeing the project failed to ensure that the legal assessment describing Ashgabat’s red line requirement was maintained in an OBO document database and shared appropriately. Moreover, they did not require the Architectural and Engineering firm that prepared the project bridging design to deliver required planning documentation that would have alerted OBO about the proper placement of the NOB. In addition, the construction contractor, Caddell, failed to obtain required construction permits from the Turkmen Government prior to initiating construction. As a result, construction of the NOB was halted after approximately $26 million had been expended to construct the facility.
The Department has made repeated attempts to persuade the Turkmen Government to reverse its decision and allow the NOB construction to continue at its current location. However, as of January 2020, all requests and proposed options to do so had been rejected by the Turkmen Government. The operational and financial implications from the improper placement of the NOB are profound. Specifically, because construction of the NOB has not been completed, embassy operations continue to be conducted from multiple locations. According to OBO’s FY 2014 Congressional Notification for constructing the NEC, this arrangement creates security and safety risks. In addition, OBO estimates that it will cost the Department between $90 million and $125 million to rebuild a new NOB in an approved location. This amount is approximately twice what was originally budgeted to construct the NOB.
Report Terms
Report Recommendations
OIG recommends that the Bureau of Overseas Buildings Operations develop and implement a formal process, including a checklist of required project documentation that must be maintained for each period of the construction planning process (the study period, the acquisitions period, and the operations period) to ensure that required project documentation is properly transferred when project managers depart or are reassigned.
OIG recommends that the Bureau of Overseas Buildings Operations take the following actions: (a) assess its supervisory oversight of its project managers to ensure that all required project documentation is maintained in the official project file and (b) design and implement internal control activities that ensure that project managers achieve agency objectives and that hold project managers accountable for implementing their internal control responsibilities.
OIG recommends that the Bureau of Overseas Buildings Operations, in coordination with the Office of Acquisitions Management and the Office of the Legal Advisor, (a) determine why the project managers acted outside their delegated authority to deviate from required contract deliverables, and (b) determine whether the program managers’ actions regarding the contract deliverables in the Architectural and Engineering contract constitute an official government act that relieves the contractor from providing the deliverables.
OIG recommends that the Bureau of Overseas Buildings Operations, in coordination with the Office of Acquisitions Management and the Office of the Legal Advisor and following the determination specified in Recommendation 3, determine whether the Architectural and Engineering contractor is liable for damages for not fulfilling all the terms and conditions of the Architectural and Engineering contract and report the final disposition of the recovery.
OIG recommends that the Bureau of Overseas Buildings Operations (OBO), in coordination with the Office of Acquisitions Management and the Office of the Legal Advisor and following the determination specified in Recommendation 3(a), (regarding why the project managers acted outside their delegated authority to deviate from required contract deliverables), establish and implement appropriate policies and procedures that ensure that Contracting Officer’s Representatives and other OBO personnel administering construction projects do not exceed their authority by deviating from the contract deliverables.
OIG recommends that the Bureau of Overseas Buildings Operations, in coordination with the Office of Acquisitions Management and the Office of the Legal Advisor, take the following actions: (a) assess whether Caddell Construction Co., LLC, is liable for damages for not fulfilling the terms and conditions of its contract and (b) recover all monetary damages for which Caddell is liable and report the final disposition of the recovery to the Office of Inspector General.
OIG recommends that the Under Secretary for Management, in coordination with the Bureau of Overseas Buildings Operations and the Office of the Legal Advisor, take action to end the impasse regarding the construction of the New Office Building on the New Embassy Compound in Ashgabat, Turkmenistan.
OIG recommends that the Bureau of Overseas Buildings Operations, following the Under Secretary for Management’s decision in Recommendation 7 to end the impasse regarding construction of the New Office Building on the New Embassy Compound in Ashgabat, Turkmenistan, take appropriate action to execute the decision and report to the Office of Inspector General the actual amount of funds, which could be as much as $125 million, placed under contract to finalize construction of the New Office Building.