Audit Report

06-26-2017
Enabling Effective Acquisition and Contract Management
U.S. Army’s Management of the Heavy Lift VII Commercial Transportation Contract Requirements in the Middle East (Project No. D2017-D000JB-0048.000)
DODIG-2017-095
     

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Objective

We determined whether the Army properly managed the requirements of the Heavy Lift VII (HL7) commercial transportation contracts.

Background

The HL7 contracts provide commercial transportation for moving Army equipment, cargo, and personnel throughout the Middle East. The Heavy Lift program supports Operation Inherent Resolve. The Army uses four contractors to fulfill its heavy lift transportation requirements, with each contractor performing under a separate contract. The Heavy Lift program is in its seventh iteration, so these contracts are referred to as the HL7 contracts.

The HL7 contracts were designed to provide transportation in Kuwait, Iraq, and Saudi Arabia. In May 2016, Army Contracting Command–Rock Island (ACC-RI) awarded a $5.95 million task order on the HL7 contracts in support of Trans-Arabian Network (TAN) ground transportation. The TAN task order expanded the capabilities of the original HL7 contracts to transport cargo between Kuwait and Jordan, Bahrain, Oman, Qatar, and United Arab Emirates.

This is the second audit on the HL7 contracts. The first audit (DODIG-2017-035) focused on the Army’s oversight of HL7 contractors in Kuwait and determined that the Army did not provide effective oversight or administration of the HL7 contracts.

Finding

The Army did not adequately manage the HL7 contract requirements. Specifically, the Army ordered an average of 39 percent more transportation assets than it needed throughout the life of the HL7 contracts.

This occurred because the 1st Sustainment Command (Theater) (1st TSC) did not

  • analyze HL7 asset usage for intra-Kuwait movements and did not continuously evaluate HL7 requirements so it could increase or decrease orders based on operational need; or
  • identify and correct the inefficiencies in the Army’s planning and execution of theater transportation missions.

In addition, Army requirement review boards did not require adequate information in order to properly validate the number of HL7 assets requested. Also, the Army over-ordered HL7 services because it did not properly plan the TAN task order and did not take appropriate measures to ensure its full operational use. Furthermore, ACC-RI included excessive guaranteed minimum payments to each of the HL7 contractors, which prompted the Army to order services to meet the guaranteed minimums rather than what was actually required within that period of performance.

As a result, the Army wasted $53.6 million throughout the life of the HL7 contracts on services that it did not require.1 

Recommendations

We recommend that the Commander, U.S. Central Command (CENTCOM), direct supported units to use the TAN, establish metrics for TAN movements, and perform quarterly assessments of the TAN’s performance and effectiveness.

We recommend that the Commander, U.S. Army Central (ARCENT), develop procedures to ensure that requirement review boards not only validate the need for commercial transportation in the Middle East, but also validate the number of HL assets that 1st TSC requests.

We recommend that the Executive Director, ACC-RI establish a reasonable and achievable guaranteed minimum on the Heavy Lift VIII (HL8) contracts to ensure the Army does not pay for services that it will not use.

Additionally, we recommend that the Commander, 1st TSC, implement a systemic process for collecting HL asset usage and establish a consistent schedule for analyzing usage information in order to use quantitative and qualitative factors when forecasting requirement quantities on future task orders; review instances of poor mission planning and execution that resulted in ordering wasted assets and implement corrective actions to prevent those inefficiencies from re-occuring; and, update the requirement review process standard operating procedures to ensure requirements packages that are submitted to the review boards include all information necessary for the board to make an informed decision.

Management Comments and Our Response

The Chief, CENTCOM Logistics and Engineering Directorate, Distribution Division, on behalf of the Commander, CENTCOM, agreed with our findings and recommendation to direct supported units to use the TAN, establish metrics for TAN movements, and perform quarterly assessments of the TAN’s performance and effectiveness. CENTCOM issued an Execute Order during the audit that directed subordinate units to use the TAN. Furthermore, the Execute Order directed ARCENT, in coordination with the CENTCOM Deployment and Distribution Operations Center, to develop appropriate metrics to support, at a minimum, quarterly assessments of the TAN’s performance and effectiveness. This recommendation is resolved and will be closed when the actions are fully implemented.

The G-4 (Chief), ARCENT Logistics, on behalf of the Commander, ARCENT, agreed with our findings and recommendation to develop procedures that ensure requirement review boards not only validate the need for commercial transportation in the Middle East, but also validate the number of HL assets that 1st TSC requests. However, the Chief, ARCENT Logistics, did not elaborate on how or when updated procedures would be developed. Therefore, the recommendation is unresolved and will remain open. We request that the Commander, ARCENT provide comments on the final report for this recommendation. We will consider the recommendation resolved once we receive the specific actions that will be taken to develop updated procedures that ensure requirement review boards are validating entire requirements.

The Chief, ARCENT Logistics, on behalf of the Commander, 1st TSC, agreed with our recommendations. During the audit, the 1st TSC began collecting and analyzing daily HL7 usage information. For a long-term solution, the 1st TSC is implementing an auditable transportation system of record to accurately forecast HL requirements. Furthermore, in an effort to implement corrective actions to improve HL7 utilization, 1st TSC initiated a weekly working group to monitor utilization and track factors that led to inefficiencies in the program. Members of the working group are also developing standard operating procedures to document the controls needed to more effectively manage HL mission execution. In addition, during the audit, 1st TSC personnel began providing usage information to the review boards for validation and are updating the requirement review process standard operating procedure to ensure the approval authority receives all required information to make an informed decision on the requested requirement. The recommendations are resolved and will be closed when we verify that the commands have implemented the proposed actions.

The Executive Director, ACC-RI, did not respond to the recommendation to establish a reasonable and achievable guaranteed minimum on the HL8 contracts to ensure the Army does not pay for services that it will not use. However, during the audit, we discussed our observations with the ACC-RI contracting officer regarding the guaranteed minimum, and the ACC-RI contracting officer subsequently solicited for the HL8 contract with a more conservative guaranteed minimum of $1 million per contractor. The management actions taken will address our concerns regarding guaranteed minimums and should ensure that the Army uses the services it orders with the HL8 guaranteed payments. Therefore, the recommendation is resolved and will be closed when the HL8 contract is awarded. We are not requesting additional comments from ACC-RI.


1 Appendix A contains our methodology for how we calculated the waste.  


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