FEDERAL BUREAU OF PRISONS
MANAGEMENT OF CONSTRUCTION CONTRACTS
EXECUTIVE SUMMARY
The Federal Bureau of Prisons’ (BOP) mission is to protect society by
confining offenders in the controlled environments of prisons and
community-based facilities that are safe, humane, and appropriately secure.
The BOP houses about 159,000 inmates in 103 prisons and other facilities.
According to the BOP, these prisons are seriously overcrowded, averaging
33 percent above rated capacity. To reduce overcrowding, the BOP has
undertaken a large and complex prison construction program. Currently,
13 prisons costing an estimated $1.6 billion are under construction.
The Office of the Inspector General (OIG), Audit Division, conducted
this audit to determine whether the BOP: (1) is adequately managing new
construction-related contracts and has improved its management since our
last audit in 1998, and (2) is making accurate and timely payments to
contractors. To determine the adequacy of the BOP’s management of
construction-related contracts, we focused on three key areas: cost,
timeliness, and quality. We reviewed documents and files at a recently
completed facility and three ongoing projects.
We found that the BOP’s management of prison construction contracts
had generally improved since our last audit in 1998; the BOP has
strengthened management controls and has improved its overall monitoring
of the contractor’s performance. We also found that the BOP has a quality
assurance program in place that adequately monitors the work of the
general contractor. However, we identified exceptions related to contract
modifications and late payments that were similar to those found in the 1998
audit as follows:
•

A $1.6 million proposed contract modification that, in our judgment is
unnecessary.

•

Three modifications, negotiated for $306,679 above the independent
government estimates that were not adequately justified as required
by the Federal Acquisition Regulations (FAR).

•

Four payments that did not comply with the prompt payment
requirements of the FAR because the BOP used incorrect invoice
receipt dates to calculate the due dates.

As a result of these issues, we made specific recommendations that
the BOP: not approve the unnecessary $1.6 million proposed modification,
remedy the $306,679 in costs that were negotiated above independent
estimates, ensure that future modifications that exceed estimates are
properly justified, and ensure that payment due dates are calculated based
on the correct invoice receipt dates.
The details of the audit results are contained in the Findings and
Recommendations section of the report. Additional information on our audit
objectives, scope, and methodology is contained in Appendix III.

FEDERAL BUREAU OF PRISONS
MANAGEMENT OF CONSTRUCTION CONTRACTS
TABLE OF CONTENTS
Page
INTRODUCTION .................................................................................. 1
BOP’s Prison Construction Program................................................ 1
Prior Reviews ............................................................................. 4
Audit Approach ........................................................................... 6
FINDINGS AND RECOMMENDATIONS ..................................................... 7
BOP MANAGEMENT OF PRISON CONSTRUCTION PROJECTS .............. 7
Contract Modifications ................................................................. 7
Contractor Timeliness ................................................................ 11
BOP Quality Assurance of Construction Projects............................. 12
Review of Contractor Payments................................................... 14
Conclusion ............................................................................... 16
Recommendations..................................................................... 17
OTHER REPORTABLE MATTERS ........................................................... 18
SCHEDULE OF DOLLAR-RELATED FINDINGS.......................................... 19
APPENDIX
APPENDIX
APPENDIX
APPENDIX
APPENDIX
APPENDIX

I - STATEMENT ON COMPLIANCE
WITH LAWS AND REGULATIONS ................................. 20
II - STATEMENT ON MANAGEMENT CONTROL STRUCTURE... 21
III - AUDIT OBJECTIVES, SCOPE AND METHODOLOGY ......... 22
IV - ONGOING CONSTRUCTION PROJECTS ......................... 24
V - BOP COMMENTS ON THE REPORT ............................... 25
VI - OIG, AUDIT DIVISION ANALYSIS AND SUMMARY OF
ACTIONS NECESSARY TO CLOSE REPORT .................... 34

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INTRODUCTION
The Federal Bureau of Prisons’ (BOP) mission is to protect society by
confining offenders in the controlled environments of prisons and
community-based facilities that are safe, humane, and appropriately secure.
As of January 2002, the BOP employed a staff of approximately 33,000 and
operated about 103 correctional facilities.1 The BOP has facilities located in
37 states across the country and in Puerto Rico. In addition to these
facilities, personnel are assigned to the Central Office in Washington, D.C.,
6 regional offices, 2 staff training centers, and 29 Community Corrections
Management offices.
Between 1998 and 2002, the federal inmate population grew more
than 31 percent from about 122,000 to about 159,000, largely due to
increased federal law enforcement efforts and the transfer of District of
Columbia inmates to the BOP. To meet the demand for increased bedspace, the BOP has undertaken a large and complex construction program.
During our audit, the BOP was in the process of building 13 new prisons,
which are expected to be completed during fiscal years 2002 to 2004, at a
cost of about $1.6 billion.
Prison overcrowding has been identified as a material weakness within
the Department since 1985 and new construction is a key part of the BOP’s
strategy to meet its bedspace needs. We initiated this audit as part of our
continuing responsibility for oversight of mission-critical management issues
in the Department of Justice. Our objectives were to determine whether the
BOP: (1) is adequately managing new construction-related contracts and has
improved its management since our last audit in 1998, and (2) is making
accurate and timely payments to contractors.
BOP’s Prison Construction Program
To meet its needs for new bed space, as well as to replace obsolete
facilities, the BOP has an ongoing construction program. Since 1985, the
BOP has constructed 49 new prisons. The 13 new construction projects will
add 6 high-security facilities, known as U.S. Penitentiaries (USP) and 7 lowto medium-security facilities, known as Federal Correctional Institutions
(FCI).2 USPs have highly secure perimeters, multiple- and single-occupant
1

The BOP operates institutions at four security levels (minimum, low, medium, and high).
It also has administrative facilities, such as pretrial detention centers and medical referral
centers, which have specialized missions and confine offenders of all security levels.
2

The BOP will add minimum-security camps at four of the six USPs and at four of the seven
FCIs being built.

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cell housing, the highest staff-to-inmate ratio, and close control of inmate
movement. FCIs have double fenced perimeters, dormitory or cell housing,
and a lower staff-to-inmate ratio than high-security facilities.
As the table below shows, the 13 institutions are expected to add, at a
minimum, 14,848 beds at a total cost of about $1.6 billion. The estimated
cost to build an institution varies between $98 million and $162 million,
depending upon the level of security required, capacity, and other sitespecific factors.
BOP NEW PRISON CONSTRUCTION PROJECTS
PERCENT
COMPLETE
(DEC. 2001)

FEDERAL
CORRECTIONAL
INSTITUTIONS
(low to medium-security)

ESTIMATED
COST
(IN MILLIONS)

1.

Bennettsville, SC

1,280

$102

0

2.

Forrest City, AR

1,152

98

37

3.

Glenville, WV

1,280

117

89

4.

Herlong, CA

1,280

130

38

5.

Victorville, CA

1,152

108

40

6.

Williamsburg (Salters, SC)

1,280

111

16

7.

Yazoo City, MS

1,152

103

27

U.S.
PENITENTIARIES
(high-security)

PROJECTS

RATED
BED
CAPACITY

8.

Big Sandy (Inez, KY)

1,088

162

80

9.

Canaan (Waymart, PA)

1,088

141

46

10.

Hazelton, WV

1,088

142

48

11.

McCreary County, KY

1,088

135

87

12.

Terre Haute, IN

960

109

4

13.

Victorville, CA

960
14,848

118
$1,576

63
--

Total
Source: BOP Design and Construction Branch

In total, approximately 160 BOP employees, located in the Central
Office and at construction sites around the country, are involved in
managing the new prison construction program. The employees—mostly
architects, engineers, contract specialists, and administrators—are
organizationally assigned to two branches within the Administrative Division.
The first branch, Property and Construction, is responsible for the acquisition
of the design and construction services in accordance with the Federal
Acquisition Regulation (FAR).3 The second branch, Design and Construction,
3

The FAR is the primary regulation used by federal agencies for their acquisition of supplies
and services.

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is responsible for the overall management of the project, to include
budgeting, programming, planning, and monitoring of the design and
construction process. Project Administrators within this branch, located
within the Central Office, oversee several projects and supervise Project
Managers. The Project Managers also located in the Central Office are
responsible for the overall management of one or more projects, including
supervising staff on-site.
A typical BOP construction site team consists of a Contracting Officer,
Supervisory Construction Representative, also known as the Contracting
Officer’s Technical Representative, two Construction Representatives, and an
Inspector. The Contracting Officer is the only individual empowered to sign
contracts on behalf of the BOP, and therefore, is ultimately responsible for
ensuring the legal and financial integrity of the contracts. The Contracting
Officer must approve all contract modifications and progress payments to
contractors. The Supervisory Construction Representative is responsible for
the on-site management of the project and serves as the liaison between the
construction contractor and the Contracting Officer. The Construction
Representatives help the Supervisory Construction Representative with onsite management, including working with the construction management
firms in performing inspections.
In the past, the BOP utilized the “design-bid-build” contracting
method; however, since September 1998 it began to use the “design-build”
contracting method. The basic difference between the two methods is that
in the former, the BOP contracted with an architectural-engineering firm to
design a prison facility and then separately contracted with a construction
firm to build. According to BOP officials, this method often resulted in
disputes over who was responsible for errors and omissions in the design or
construction of a prison. Under the new “design-build” method the BOP
contracts with one firm, known as a general contractor, that is responsible
for both the design and construction of the prison.
Officials at the BOP contend that the use of the design-build method
offers many advantages over the use of a design-bid-build process. Among
them: (1) there is a single point of responsibility for both design and project
construction; (2) synergy resulting from a contractor who is designer and
builder; (3) faster project completion because construction starts while the
facility is being designed; and (4) reduced claims and litigation. As part of
this new approach, BOP officials told us they developed a Partnering
Program to improve the quality of the construction projects, streamline the
design and construction schedule, and alleviate unwanted adversarial
relationships with contractors.

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To help oversee the design and construction, the BOP contracts with
construction management firms that are organizationally independent of the
general contractors. These firms assist the BOP by performing quality
reviews, monitoring daily activity, and exercising oversight over the general
contractor. Specifically, the firms are required to regularly monitor the
construction schedule, review the design and any design changes, prepare
independent cost estimates for any modifications to the design-build
contract, and regularly inspect material and workmanship to ensure that
quality standards are met. The management firm staff is co-located with
BOP staff at each project, providing continuous feedback on the contractor’s
performance.
To build new prisons, the BOP contracts with construction firms
through open competition and awards firm-fixed-priced contracts. Separate
contracts are issued for each project and construction management.
According to the FAR, a firm-fixed-price contract generally does not provide
for price adjustments based on the costs incurred by the contractor. The
price is established at the time of the award. However, during the life of a
construction contract, certain requirements or terms and conditions may
have to be revised for any number of reasons; such as a mistake in fact,
additions to the scope of work, and unforeseen events – changes in building
codes, environmental concerns, etc. These changes, which may increase the
cost or length of a project, must be in writing and are referred to as contract
modifications.
In addition to the general FAR requirements that the BOP is required
to follow when issuing and monitoring a contract, the FAR includes
requirements that are specific to Government construction projects. For
example, FAR Part 36, Construction and Architect-Engineer Projects,
includes requirements for the special aspects of Government construction
contracting, Design-Build contract selection procedures, and contract clauses
to be added to a construction contract.
Prior Reviews
We previously audited the BOP’s prison construction program in 1998.4
The audit identified weaknesses in the BOP’s planning, monitoring and
administration of prison construction contracts, resulting in unnecessary
contract modifications, inaccurate and untimely payments, and other costs
that were considered to be avoidable. In total, we questioned about
$18.5 million in costs. Specifically, we reported that the BOP:
4

Office of the Inspector General (OIG) Audit Report number 98-30, “Bureau of Prisons’
Management of Construction Contracts for New Prisons,” dated September 1998.

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•

could have saved over $7.1 million in construction costs at one site,
had it not compressed the construction schedule;

•

did not evaluate potential errors and omissions totaling $6.6 million
committed by the architectural-engineering firms;

•

incurred about $3 million in costs for contract modifications that could
have been avoided;

•

inappropriately paid contractors about $1.5 million in advance,
resulting in $2,232 of lost interest;

•

did not withhold funds for non-conforming work valued at $1.2 million;

•

did not justify modifications that exceeded independent estimates by
$521,976; and

•

did not always comply with the Prompt Payment Act resulting in a
small amount of unnecessary interest payments to contractors.

We recommended that the BOP take appropriate corrective actions.
Subsequently, the BOP provided substantiation that corrective actions were
implemented and, as a result, the report recommendations were closed. In
addition, as previously discussed, the BOP changed its method of contracting
for architectural and construction services. Consequently, our review
focused on the BOP’s new contracting system and those areas from the prior
report that were still applicable.
In March 2002, the U.S. General Accounting Office (GAO) reported on
the results of its review of the BOP's payments to construction contractors.5
GAO found that internal controls were in place and operating and that
payment amounts were correct, or, that if errors occurred, they were
detected and corrected promptly as a normal part of the payment system.
GAO also concluded that the risk of undetected overpayments did not appear
to be significant based on the controls in place and operating at the time of
its review.

5

U.S. General Accounting Office (GAO), Bureau of Prisons Contract Payments, GAO-02508R, dated March 20, 2002.

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Audit Approach
In this audit, we focused on the BOP’s management of awarded
construction contracts; we did not specifically examine the BOP’s
management of the precontract-award process. The audit specifically
assessed the processes and controls the BOP had established for ensuring
that contract modifications are properly approved, projects will be completed
on time, and the construction adheres to contractual requirements. In
addition, we reviewed the BOP’s payments made to its contractors to
determine whether they were accurate, represented the percentage of
progress completed, and were paid timely in accordance with the FAR
prompt payment requirements.6 We reviewed documents and files at the
BOP Central Office and at four construction locations representing various
phases of prison construction. The site visits included the recently
completed USP facility in Coleman, Florida and at three ongoing construction
sites located in McCreary County, Kentucky (USP) and Victorville, California
(FCI and USP). Lastly, we determined whether any of the 13 projects had
experienced or were experiencing significant delays. See Appendix III for
the details of our scope and methodology.

6

The FAR Subpart 32.9 prescribes policies and procedures for implementing prompt
payment regulations relating to invoice payments on all contracts.

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FINDINGS AND RECOMMENDATIONS
BOP MANAGEMENT OF PRISON CONSTRUCTION PROJECTS
We audited the BOP’s management of construction contracts in effect
as of December 2001 and determined that, in general, contract
management had improved since our 1998 audit. Specifically, the BOP
has strengthened controls over contract modifications, quality control,
and progress payments to contractors. However, of the 31 contract
modifications reviewed, we identified a $1.6 million proposed contract
modification at the Victorville USP that, in our judgment, is
unwarranted. We also noted three modifications that exceeded the
Independent Government Estimates by $306,679 without required
justification. Similar exceptions were reported in our 1998 audit
report.
CONTRACT MODIFICATIONS
A contract modification can increase the cost or length of a project, or
both and it can either be initiated by the BOP or at the request of the
contractor. The BOP may initiate contract modifications to change the scope
of work that results from new regulations, policy decisions, or changes in
technology. Similarly, the contractor may request a change due to
unforeseen building conditions or circumstances that could not be reasonably
anticipated when the contract was awarded. BOP Construction Management
Guidelines require that all contract modifications be evaluated and approved
by the Supervisory Construction Representative at the construction site and
by BOP management in its Central Office.7 If approved, the modification is
forwarded to the Contracting Officer for final approval. The Contracting
Officer is the only individual with authority to modify the contract. The
sections that follow discuss our review of contract cost modifications and
contract time modifications.
Cost Modifications
A contract modification can have a significant effect on the final cost of
a prison construction contract. Therefore, it is important that the BOP
approve only modifications that are necessary and reasonably priced. The
BOP Central Office reviews requested modifications to determine if they are
7

The officials who are required to approve a modification vary depending on the value of
the modification. Modifications up to $50,000 must be approved by the Project Manager
and modifications up to $100,000 must be approved by the Project Administrator.
Modifications of $100,000 or more, or modifications that extend the length of a contract,
must be approved by the Chief of the Design and Construction Branch.

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necessary. In addition, BOP staff on-site ensures that the price of a
modification is fair and reasonable by obtaining an Independent Government
Estimate (IGE). An IGE, an estimate usually prepared by a construction
management firm, is used by the BOP to negotiate a fair and reasonable
price for a contract modification.8 FAR Subpart 4.803(a)(2) requires that the
contract file contain all justifications and approvals. In our judgment, this
requirement includes the justification for negotiating a modification price
above an IGE.
For the four projects we reviewed, the BOP issued a total of 68
modifications: 43 that increased the cost of the contracts by $9.9 million,
3 that decreased the cost of the contracts by $203,436, and 22 that had no
dollar effect.9 The net effect of the increases and decreases in costs
resulting from the modifications was $9.7 million as shown in the following
table.
PRISON CONSTRUCTION PROJECTS REVIEWED
PROJECTS10
USP Coleman, FL
USP McCreary County, KY
FCI Victorville, CA
USP Victorville, CA
Total

CONTRACT
AWARD
AMOUNT
$77.5
119.6
99.8
102.0
$398.9

TOTAL
MODIFICATION
AMOUNT
$2.4
1.1
1.6
4.6
$9.7

NUMBER OF
MODIFICATIONS
28
9
9
22
68

TOTAL
CONTRACT
AMOUNT
$79.9
120.7
101.4
106.6
$408.6

Source: BOP contract files

We examined 31 of the 43 modifications that increased the cost of the
contract. Our sample represented 84 percent of the increased costs. We
found that six modifications were not adequately supported in accordance
with FAR. Specifically, three modifications exceeded the IGE without
justification and four, including two that also exceeded the IGE, lacked
adequate documentation showing why the modification was necessary.
Finally, we identified a $1.6 million proposed modification that, in our
judgment, is unnecessary. As a result, we are questioning the amount that
exceeded the IGEs and recommending that the BOP not approve the
proposed modification. We are not questioning the inadequately
documented modifications because BOP officials’ explanations for why they
8

The BOP is required by FAR Subpart 36.203 to obtain and IGE for contract modifications
that are anticipated to cost $100,000 or more.

9

Modifications that have no dollar effect may result from administrative changes such as
appointing a new Contracting Officer for the contract.
10

As of October 18, 2001, for USP Coleman; June 29,2001, for USP McCreary; and
December 4, 2001, for USP and FCI Victorville.

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were necessary appeared reasonable. These modifications are discussed in
more detail below.
Modifications in Excess of IGEs - At the USP Victorville and
USP Coleman projects, the total costs for three contract modifications were
not reasonable, in our judgment, because the negotiated price exceeded the
IGEs by a total of $306,679 without written justification by the Contracting
Officer as required by FAR. Specifically:
•

At the USP Victorville, a $2,035,000 contract modification to add
security enhancements and install additional closed-circuit televisions
was $259,191 above two IGEs. In addition, at the USP Coleman, a
$136,154 contract modification to change landscaping features in the
interior of the facility was $17,254 above the IGE. BOP officials did
not provide an explanation as to why they paid $276,445 more than
the IGEs for these contract modifications.

•

At the USP Coleman, a $279,097 contract modification to provide a
sealant finish to the exterior and interior walls of the prison and install
fiber optic cabling was issued for $30,234 above two IGEs. According
to BOP officials, the IGEs were understated. However, the contract
files contained no supporting documentation to substantiate their
assertions.

Unwarranted Modification - At USP Victorville, the BOP was
considering issuing a $1.6 million contract modification that, in our
judgment, is unwarranted. If approved, this proposed modification would
unnecessarily increase the cost of the project.
Specifically, BOP officials stated that in an effort to facilitate the
construction of this prison, they provided all bidders with design documents
for which the BOP had paid an architect $2.5 million. Bidders were expected
to take these documents into account in bidding on the design and
construction of the prison. In September 2000, the BOP awarded the
contract for $102 million, which included $3.7 million for additional design
work. However, 1 year after the contract was awarded, the general
contractor requested a $2 million modification to remedy what it perceived
as design omissions and deficiencies in the original architects’ work.
Officials from the Design and Construction Branch initially rejected the
contractor’s request based on the fact that the contractor examined the
design documents before submitting a bid. However, they later
recommended that the Contracting Officer approve a modification for
$1.6 million. According to BOP officials, their rationale for recommending
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approval was partly to preclude any future claims that the contractor might
bring against the BOP. In addition, officials told us that the total amount
spent by the BOP for the design of the facility after the modification would
not exceed the amount incurred for design work on similar projects.
Furthermore, BOP officials said that the situation at Victorville occurred
because they were transitioning to the design-build contracting method and
they were no longer providing design documents to bidders. At the time of
our review, the Contracting Officer had not approved the modification.
In our judgment, BOP management should not approve this proposed
modification for the following reasons. First, the contractor had previously
worked with the architect who prepared the design documents at another
USP and should have been familiar with the architect’s work during the
solicitation and contract-awarding phase. Second, the contractor’s own cost
proposal indicated that the contractor reviewed the design documents before
submitting a bid and noted that no significant adjustments were needed.
Finally, recommending approval of a modification to preclude any future
claims or because total design costs after the modification will fall within a
range of design costs on similar projects are, in our judgment, not valid
justifications. Rather, a modification should be based on a determination
that the work is necessary and is not covered under the terms of the original
contract. We saw no evidence in the contract files that such a determination
had been made and, consequently, we recommend that the Contracting
Officer not approve the modification.
Inadequately Documented Modifications - At USP Coleman we
found that four contract modifications, including the landscaping and sealant
modifications discussed above, lacked adequate documentation explaining
why they were considered necessary. However, BOP officials’ reasons for
the modifications, as explained to us during our site visit, appeared
reasonable. For example, BOP officials stated that the landscaping
modification was necessary to enhance security. The original contract
specified that areas between housing units be covered with grass. The
warden was concerned that prisoner maintenance of these areas would have
required additional security because they were not easily visible from guard
towers. Consequently, BOP officials told us they submitted the modification,
which called for replacing the grass with gravel, to address the warden’s
security concerns.
BOP officials stated there was no BOP policy or procedure requiring
written justification for modifications. Nevertheless, FAR Subpart
4.803(a)(2) states that the contract file should contain justifications and
approvals. In our judgment, the reasons why modifications are needed

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should be documented to strengthen internal controls and help ensure that
only necessary modifications are approved.
Time Modifications
BOP construction contracts specify a completion date that the general
contractor is expected to meet. However, extensions to the due date can be
approved through a contract modification for reasons such as labor strikes,
inclement weather, and BOP directed changes in the scope of the work.
Before awarding a time extension, the construction management firm is
required to analyze each request to determine the effect it has on the work
schedule, known as the critical path.11 Because a change to the critical path
affects the completion date of the project, it is important that time-related
modifications be properly justified and evaluated to ensure that only
warranted modifications are approved.
At three of the four projects visited, we reviewed seven time extension
modifications. Our review revealed that these modifications were supported
and properly approved. In addition, the changes made had a minimal
impact on the completion dates for each of the three projects, adding
between 22 to 47 days to the overall completion date, or an increase of
2.9 to 5 percent. The remaining project reviewed was completed 60 days
ahead of schedule.
CONTRACTOR TIMELINESS
According to the BOP, its facilities are dangerously overcrowded at
33 percent above rated capacity nationwide. Moreover, high security
facilities are overcrowded by 51 percent. Consequently, the timely
completion of prison construction projects is critically important to help
reduce prison overcrowding in the federal prison system.
To determine if any of the 13 ongoing projects were experiencing
significant delays, we compared the amount of time that had elapsed to the
percentage of work that had been completed. While this is not a definitive
measure of timeliness, in our judgment, it can provide a reasonable
indication as to whether a project is experiencing delays or has the potential
to be delayed.

11

For a construction contract, the BOP and the contractor agree up front to a series of
milestone dates for each construction activity to occur. The contractor must meet essential
milestones dates and related tasks in order to complete the project on time. These
essential dates and tasks are called the Critical Path.

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Our comparison did not find significant delays in 12 of the 13 projects.
The USP Canaan project, however, was at least 1-year behind schedule.
According to BOP officials, the delay was caused, in part, when local citizen
groups voiced concerns, not previously raised by local public officials, that
the project could damage historic structures on the site. The local groups
appealed to the Pennsylvania State Historic Preservation Office (SHPO) to
ensure that the BOP complied with the National Historic Preservation Act. As
a result, the SHPO required the BOP to perform a study of the potential
impact its construction activity would have on these structures.
Construction was also delayed because of disagreement between the BOP
and the U.S. Army Corps of Engineers (Corps) over a wetlands permit under
the Clean Water Act. The Corps wanted to designate a larger section of the
construction site as a wetlands area than what the BOP was willing to give
up, based on its interpretation of the regulations.
Based on our review of the project files, the BOP made a determined
effort to come to an agreement with SHPO and the Corps. The BOP
conducted the study for SHPO and entered into a Memorandum of
Agreement on steps it would take to protect the historic structures. The files
also showed that the BOP met regularly with officials from the Corps and
ultimately the wetlands disagreement was resolved. BOP officials estimated
that the delay increased the cost of the project by $5-10 million. They
stated that the problems encountered for this project were not typical of
past experiences on construction projects.
BOP QUALITY ASSURANCE OF CONSTRUCTION PROJECTS
The FAR, Part 46 requires that the BOP institute a quality assurance
program. The need for a quality assurance program is especially important
on firm-fixed-price contracts—the type of contract the BOP awards to
construct prisons. Under such contracts, the general contractor is paid a
fixed amount to design and build a prison within a specified period of time.
The contractor’s anticipated profit margin at the start of the contract can be
reduced by higher than expected costs or penalties assessed for untimely
completion. Thus, a contractor could have an incentive to reduce its costs
by eliminating required work or using inferior materials. Without an
adequate quality assurance program, the BOP may have projects that are
built on time and within cost, but lack the necessary quality to ensure a safe
and secure facility.
The BOP is responsible for the overall quality program and has final
say in corrective actions. The BOP’s quality program begins before contracts
are awarded when the BOP ensures that it selects only qualified contractors.
After contractors are selected and construction is in progress, the BOP relies
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on management firms to oversee the contractors’ daily operations. In
addition, general contractors are required to have their own quality
programs.
Contractor Integrity - Before awarding a contract, the BOP is
required by the FAR to determine whether the prospective contractor is
qualified to receive the contract. This includes determining whether the
contractor has been debarred from doing business with the federal
government. BOP officials told us they check the debarment list12 to verify
that the prospective contractor has not been debarred. At the four locations
visited, we verified that the contractors were not on the list.
Because the construction management firm is closely involved in
performing inspections and observations of material and work being
performed by the general contractor and its subcontractors, it is important
that the firm be independent. Therefore, the BOP requires the management
firm to provide a certificate attesting to its organizational independence from
the general contractor. At each of the four projects visited, we verified that
the firm provided the certificate to the BOP.
Inspection Process - Each project has a quality team consisting of
BOP and the construction management firm personnel, who observe the
work of the general contractor to ensure it conforms to contract
requirements. At the four locations reviewed, we verified that inspections
were being conducted by examining daily inspection records and other
relevant reports. In addition, we interviewed inspectors to determine how
they performed the inspections and what they looked for. Furthermore, we
observed the process for documenting and resolving exceptions.
To perform their functions, the quality team must be familiar with the
contract documents and requirements, the construction drawings, time
schedules, the BOP Technical Design Guidelines, and applicable building
codes. If staff from either the BOP or the construction management firm
identifies contractor non-conformance in material or workmanship, one of
two reports are prepared to notify the general contractor and track
corrective action. One report, the Field Observation Report, is used to
inform the general contractor of minor non-conformance or other
observations. The other report, the Deficiencies and Omissions Report, is
prepared for more serious issues when the work was performed incorrectly
or omitted. The BOP provides these reports to the contractor who is
expected to take corrective actions. Then the BOP verifies that the
12

The U.S. General Services Administration maintains the List of Parties Excluded from
Federal Procurement and Nonprocurement Programs.

- 13 -

corrections are made; uncorrected deficiency reports may result in a
monetary penalty.
We reviewed all 214 Field Observation Reports at the four projects
visited as well as all 20 Deficiencies and Omissions Reports at USP Coleman
to determine whether corrective actions were taken. We found that the
general contractors acted on all the problems noted in the reports and the
items reported were resolved. BOP officials told us the reason there were no
Deficiencies and Omissions Reports issued at USP McCreary County, USP
Victorville, and FCI Victorville was because BOP management, at these
locations, had been successful in resolving possible non-conformance issues
before they warranted the more serious deficiency report.
General Contractors’ Quality Programs - Under the terms of the
contract, general contractors are also required to have a quality assurance
process, which includes using their own inspectors to review the work.
These inspectors prepare reports for all non-conformance issues identified.
Before April 2000, the general contractors were not required to share these
reports with the BOP. However, the BOP now requires general contractors to
provide a list of all deficiencies.
The BOP had received these lists at three of the four locations
visited.13 To determine if the BOP was adequately monitoring the
contractors’ corrective actions, we reviewed the BOP’s follow up actions. We
found that in each instance the BOP followed up on the deficiencies by
meeting with the general contractor on a regular basis, reviewing related
documents, and physically verifying that corrective actions had occurred.
REVIEW OF CONTRACTOR PAYMENTS
The FAR Subpart 32.101 authorizes the BOP to make monthly progress
payments to its contractors based on the percentage of work completed. To
achieve this, the BOP and the general contractor agree to a schedule of
tasks that need to be performed and their value. At the conclusion of each
month, the contractor submits a payment request that identifies the
materials delivered and the percentage of work performed for each task.
A single payment can involve millions of dollars. Therefore, it is
important that the BOP adequately review the contractors’ payment requests
to ensure that work is billed accurately, reflects the materials used, and the
work has been performed. In addition, when processing these payment
13

We did not perform this review at the USP Coleman project because, as discussed earlier,
the general contractor was not required to submit such reports to the BOP.

- 14 -

requests, the BOP is required to adhere to the FAR Subpart 32.9. According
to the FAR, if the BOP makes a late payment, it is required to pay interest to
the contractor.
Accuracy of Payments – Upon receipt of the contractor’s payment
request, the BOP’s procedure is to compare, with the assistance of the
construction management firm, the percentage of work the general
contractor claims to have completed to the actual work performed. If
discrepancies are identified, the BOP meets with the general contractor to
discuss and negotiate revisions to the percentage claimed. Once the
differences are resolved, the contractor submits a revised payment request
incorporating the negotiated revisions. The BOP Contracting Officer
approves the revised payment request and forwards it to the Central Office
for payment.
At three of the four projects visited, we tested the payments made to
the general contractors and the construction management firms. To
determine if the payments made were accurate and reflected the percentage
of completion, we judgmentally selected 58 payments totaling over
$110 million from the 91 payments totaling over $154 million that had been
made at the time of our audit. We examined the BOP’s and the construction
management firms’ review of payment requests and the revisions resulting
from the negotiations with the contractors to determine if the revised
payment requests were accurate. We found that all payments made were
accurate and were reviewed and approved in accordance with the process
established by the BOP. At the remaining location, we did not test payment
requests, but we identified the internal controls over the payment review
and approval process and these controls appeared to be adequate.
Timeliness of Payments – The FAR Subpart 32.904(d) requires the
Government to make payments on construction contracts within 14 days of
receipt of the billing invoice and within 30 days for all other types of
contracts. If the Government makes a late payment, the FAR Subpart
32.907 requires that interest be paid to the contractor.
We tested the 58 sample payments described above to determine
whether the BOP was complying with the prompt payment requirements of
the FAR. We found that the BOP paid 51 of the invoices on time. Three
others were 2 to 31 days late, but interest was paid to the contractor as
required. The BOP did not comply with the prompt payment requirements
for the remaining four payments as follows:
•

At USP Victorville, a $5,373,256 payment and a $4,988,369 payment
to the general contractor were paid 25 days late and 1 day late,
- 15 -

respectively. In addition, at FCI Victorville, a $20,000 payment to the
general contractor was paid 14 days late. The BOP did not pay the
contractors interest for these late payments.
•

At USP Coleman, the BOP erroneously paid late interest totaling $614
to the general contractor for a payment that was paid on time.

These errors occurred because the BOP’s Central Office used incorrect
dates for the receipt of the billing invoices when they calculated payment
due dates. In our judgment, these errors were not significant and resulted
from not applying the FAR requirements when calculating payment due
dates. We advised the BOP to recoup the $614 overpayment and to pay the
appropriate interest for the late payments; they agreed to do so. We also
advised the BOP to take steps to ensure that payment due dates are
calculated based on the correct invoice receipt dates.
CONCLUSION
In our judgment, the BOP has generally strengthened controls over its
management of construction projects since our last audit in 1998. The BOP
has a quality assurance program in place and appears to adequately monitor
the quality and timeliness of the general contractors’ work. In addition,
payments made to contractors were accurate and most were paid on time.
Generally, contract modifications were adequately supported, properly
approved, and the amounts were either below the IGE or if not, were
adequately justified. However, we identified a $1.6 million proposed
modification that in our judgment was unnecessary and three modifications
that were negotiated for $306,679 above the IGEs without adequate
justification.

- 16 -

RECOMMENDATIONS
We recommend that the BOP Director:
1. Remedy the $306,679 in questioned costs for contract modifications
that exceeded the IGEs.
2. Ensure that future contract modifications that exceed the IGE are
properly justified.
3. Ensure that the unnecessary $1.6 million proposed modification for
additional design and construction work at the USP Victorville project
is not approved.
4. Ensure that future contract modifications have documented reasons for
why they are needed.
5. Remedy the $614 erroneous interest payment and pay interest to the
contractor for the three late payments we identified.
6. Ensure that payment due dates are calculated based on the correct
invoice receipt dates.

- 17 -

OTHER REPORTABLE MATTERS
Our audit did not specifically address the precontract-award side of the
BOP’s management of construction contracts. However, during our review
we noted that the Big Sandy, Kentucky construction project is expected to
cost the BOP $162 million to complete, or about $20 million more than
similar construction projects. BOP officials explained that the costs are
higher for this project because extensive work was needed to stabilize the
ground the prison was to be constructed on; the site was a former coalmine.
BOP officials further stated that although other sites in Eastern Kentucky
were considered, only the Big Sandy location met the BOP’s requirements.
They did not select other nearby sites for reasons that included unacceptable
soil conditions and locations, inadequate acreage, and negative effects from
past mining activity. In our judgment, it is unclear why some of the other
locations were excluded, taking into consideration the overall condition found
in Big Sandy. The BOP files did not show that the costs of conditioning these
properties were considered when BOP officials made their selection.

- 18 -

SCHEDULE OF DOLLAR-RELATED FINDINGS
QUESTIONED COSTS:

AMOUNT

Modifications issued that exceeded the IGE
without adequate written justification
Erroneous interest payment
TOTAL QUESTIONED COSTS

$

PAGE

306,679

9

614

16

$ 307,293

FUNDS TO BETTER USE:
Unwarranted modification

$ 1,600,000

TOTAL FUNDS TO BETTER USE

$1,600,000

TOTAL DOLLAR-RELATED FINDINGS

$1,907,293

9

_________________
QUESTIONED COSTS are expenditures that do not comply with legal, regulatory or
contractual requirements, or are not supported by adequate documentation at the
time of the audit, or are unnecessary or unreasonable. Offset, waiver, recovery of
funds, or the provision of supporting documentation may remedy questioned costs.
FUNDS TO BETTER USE are future funds that could be used more efficiently if
management took actions to implement and complete audit recommendations.

- 19 -

APPENDIX I
STATEMENT ON COMPLIANCE WITH LAWS AND
REGULATIONS
We audited the BOP’s management of construction contracts and
performed audit work between July 2001 and April 2002. Our audit included
a review of selected new prison construction projects and related
transactions.
In connection with the audit, and as required by the Government
Auditing Standards issued by the Comptroller General of the United States,
we tested transactions and records to obtain reasonable assurance about the
agency’s compliance with laws and regulations that, if not complied with, in
our judgment could have a material effect on program operations.
Compliance with laws and regulations applicable to the contracting for and
construction of new prisons is the responsibility of BOP management.
Our audit included examining, on a test basis, evidence concerning
laws and regulations. The specific laws and regulations for which we
conducted tests were the Federal Acquisition Regulations.
Our tests indicated that, for the contracts and records tested, the BOP
generally complied with the provisions of applicable laws, and guidelines,
except as noted in the report. With respect to those transactions not tested,
nothing came to our attention that caused us to believe the BOP was not in
compliance with applicable laws.

- 20 -

APPENDIX II
STATEMENT ON MANAGEMENT CONTROL STRUCTURE
In planning and performing our audit of the BOP’s management of
construction contracts, we considered the management control structure for
the purpose of determining our audit procedures. This evaluation was not
made for the purpose of providing assurance on the BOP’s overall
management control structure. However, we noted certain matters
involving the management control structure and management of the BOP’s
construction contracts that we consider to be reportable conditions under
generally accepted government auditing standards.
Reportable conditions involve matters coming to our attention relating
to significant deficiencies in the design and operation of the management
control structure that, in our judgment, could adversely affect the BOP’s
ability to manage new prison construction contracts. We identified the
following deficiencies: (1) the BOP did not always document the necessity
for a contract modification, and (2) the BOP did not always justify why it
negotiated modifications for a higher amount than the Independent
Government Estimate.

- 21 -

APPENDIX III
AUDIT OBJECTIVES, SCOPE AND METHODOLOGY
Audit Objectives
Our objectives were to determine whether the BOP: (1) is adequately
managing new construction-related contracts and has improved its
management since our last audit in 1998; and (2) is making accurate and
timely payments to contractors.
Scope
The audit was conducted in accordance with the Government Auditing
Standards issued by the Comptroller General of the United States. To
accomplish our audit objectives, we performed audit work at the BOP Central
Office located in Washington, D.C., a recently constructed USP facility in
Coleman, Florida, and three ongoing prison construction projects in
McCreary County, Kentucky (USP) and Victorville, California (FCI and USP).
Our audit work focused on the BOP’s management of construction
contracts after they were awarded; we did not audit the pre-award process.
As a result, we did not make a determination as to whether the contract
award amount, which was competitively bid, was reasonable. Instead, we
focused on four areas: the cost of contract modifications, the timeliness of
ongoing projects, the quality-control process, and payments made to
contractors.
Methodology
We assessed the processes and controls that the BOP established over
prison construction projects by interviewing staff at both the BOP Central
Office and at the four sites that we visited. We also examined contract files,
which included modifications, justifications, and other related documentation
at these locations.
In our review of modification costs, we selected a judgmental sample
of the ten highest dollar changes to the contract at each of the four sites we
visited. The universe of contract changes that we selected from included
only those changes that resulted in an increase in the total contract amount.
We did not test contract changes that decreased or did not affect the cost of
the contract.

- 22 -

APPENDIX III
In our review of project schedules, we determined whether each
project site that we visited was on schedule by interviewing BOP staff and
reviewing progress measurements. In addition, we selected all modifications
that increased the contract duration and reviewed them to determine
whether they were adequately supported and justified. For the ten ongoing
projects that we did not visit, we analyzed progress measurements in the
BOP’s weekly progress reports to determine whether the ten ongoing
projects are scheduled to be completed on time.
To review the BOP’s quality control process, we examined its oversight
and inspections of contractors at the four locations we visited. In addition,
we reviewed all available Field Observation Reports and Deficiency and
Omissions Reports at three of the construction sites.
In our review of contractor payments, we selected 20 payments at the
USP Coleman project; 10 payments made to the general contractor and 10
payments made to the construction management firm. Each sample
included the five highest dollar payments with the remaining five payments
selected judgmentally. We reviewed all 38 payments at the FCI and USP
Victorville projects.

- 23 -

APPENDIX IV
ONGOING CONSTRUCTION PROJECTS

USP Canaan

$

FCI Herlong

$

USP Hazelton

USP Terre Haute

$

USP Big Sandy$
USP McCreary $

FCI and USP Victorville

$

FCI Forrest City$

$

FCI Yazoo City

Legend:
FCI = Federal Correctional Institution
USP = United States Penitentiary

- 24 -

$

$

FCI Glenville

FCI Williamsburg

$

$

FCI Bennettsville

APPENDIX V

U.S. Department of Justice

Federal Bureau of Prisons

Off,ce of the Director

Washington, DC 20534

June 20, 2002

MEMORANDUM FOR GUY K. ZIMMERMAN
ASSISTANT INSPECTOR GENERAL FOR AUDIT

FROM:

~wi~~~
Federal Bureau of Prisons

SUBJECT:

Response to the Office of Inspector General's
(OIG) Draft Report: Federal Bureau of Prisons
Management of Construction Contracts

The Bureau of Prisons (BOP) appreciates the opportunity to
respond to the recommendations from the OIG's draft report
entitled Federal Bureau of Prisons Management of Construction
Contracts. We appreciate the professionalism of your staff and
the detail and insights shown in their review of our program.
The BOP has reviewed the recommendations of the report and will
address them in our national training event scheduled this July
for new institution development program staff. The Bureau
concurs with the report and offers the following comments.
Remedy the $306,679 in questioned costs for
contract modifications that exceeded the IGEs.

Recommendation #1:

The BOP agrees with the OIG recommendation, with the
exception of the reference to Modification 26U regarding security
enhancements and additional CCTV cameras at USP Victorville.

Response:

At the time of the. OIG review, the modification had not been
executed by the contracting officer. The contracting officer had
remedied all issues prior to award of the modification. Since
all-issues were solved prior to award, we believe the questioning
of these costs is moot.

- 25 -

APPENDIX V

BOP agrees with the recommendations regarding the below
modifications:
Modification 25 The contracting officer has since properly documented the
file clarifying justification for exceeding the IGE. The
documentation was completed June 4, 2002.
Modification 13 The contracting officer has since properly documented the
file clarifying justification for exceeding the IGE. The
documentation was completed April 25, 2002.
Recommendation #2:
Ensure that future contract modifications
that exceed the IGE are properly justified.
Response:
The BOP agrees with the OIG recommendation. A
memorandum dated May 31, 2002, (Attachment 1) was sent to all
contracting officers to ensure that they follow the requirements
in the FAR directing that the file contain proper justification
to support the agreed to price. Compliance will be monitored
through the QA process.
Recommendation #3:
Ensure that the unnecessary $1.6 million
proposed modification for additional design and construction work
at the USP Victorville project is not approved.
Response:
The BOP agrees with the OIG recommendation, and the
modification as proposed will not be approved.
Concerns similar
to those identified by OIG were noted in our QA review of
proposed Modification 280 conducted on April 18, 2002. Our
review identified deficiencies in the submitted documentation
that do not support executing a $1.6 million modification under
Contract JXOOc-395. The BOP will not approve this modification
without proper justification and documentation.
Recommendation #4:
Ensure that future contract modifications
have documented reasons for why they are needed.
Response:
The BOP agrees with the OIG recommendation.
It is
good management/business practice to include more specific
information to support modifications. A memorandum dated
May 31, 2002, (Attachment 1) was sent to all contracting officers
to ensure they include rationale for why a modification is
necessary.

- 26 -

APPENDIX V

Recommendation #5:
Remedy the $614 erroneous interest payment
and pay interest to the contractor for the three late payments we
identified.
Response:
The BOP agrees with the OIG recommendation. The $614
interest payment was recovered under bilateral Modification
Number 29, dated December 28, 2001. The contractor received
interest for the three late payments on June 20, 2002.
Recommendation #6:
Ensure that payment due dates are calculated
based on the correct invoice receipt dates.
Response:
The BOP agrees with the OIG recommendation. The
BOP issued written guidance to all contracting officers in
memorandums dated December 7, 2001, and May 31, 2002,
(Attachment 2) to bring uniformity to the designation of the
"billing office" where the invoices are to be submitted for all
design-build contracts. This should eliminate any future
problems.

If you have any questions regarding this response, please contact
Michael W. Garrett, Senior Deputy Assistant Director, Program
Review Division, at (202) 616-2099.
Attachments

- 27 -

APPENDIX V

.::,.

Attachment 1

.

U.S. Department of Justice
Federal Bureau of Prisons

W ~ . DC :lOSJ4

May 31, 2002

MEMORANDUM FOR ALL CONTRACTING OFFICERS
CONSTRUCTION CONTRACTING SECTION

FROM:

SUBJECT:

A;:

:Jth, - Chief
Property and Construction Branch

Contract Modifications

This is in reference to Contract Modifications.
Recently, documentation needed for Contract Modifications have
been the subject of review and discussion. Therefore, this
memorandum is being issued to provide guidance.
Please ensure that future Contract Modifications have documented
reasons for why they are needed (see Attachment A).
Additionally, ensure that future Contract Modifications, that
exceed the Independent Government Estimates, are properly
justified (see Attachment B). In an effort to assist you with
this documentation, the attached documents have been developed
and are being issued for your use. These documents should help
to strengthen internal controls and help ensure that only
necessary modifications are approved.
If you have any questions, please let me kno~.
Attachments

- 28 -

APPENDIX V
Attachment 1
;,

FINDINGS OF FACT FOR CONTRACT MODIFICATION

Contract Number:,_ _ __

Modification Number:_ _ _ __

Project Name and Ltx:ation:

Contractor_ _ _ _~ - - - - - - - - - - - - - - - - - Reason for Change:

D FBOP Design Change

□

Project Acceleration

D Unforseen/Differing Site Conditions

□

Suspension of Work/Government Caused Delay

D Security Enhancement

D Value Engineering

D Time Extension

□

Other

_ _ _ _ _ _ _ _ _ _ _ _ __

Description of Modification:

Why is it ia the best interest to accomplish this work and uder this contract? (Include rationale for time
extension if applicable)

As a result of this modification, the performance period will be e:rte11ded {calendar days): _ _ _ __

Present Completion Date:._ __

Revised Completion Date: _ __

Contracting Officer:,_ _ _ _ _ _ _ _ _ _ _ _ __

A.moll.Dt _ _ _ __

Date:_ _ _ _ _ __
Attachment A

- 29 -

.

Tab#lO

"

CONTRACT NUMBER JXOOC-_ _ COST ANALYSIS
MODIFICATION NUMBER_-__

In accordance with 15.404-1 (c)
C.goiy (EXAMPLES)

INDEPENDENT
GOVERNMENT

CON'mACTOR

DCAAAUDIT

TBCHNICAL

PROPOSAL

(IF APPLICABLE)

ANALYSIS

AWARD AMOUNT

ESTIMATE

Home Office overhead
Field Condiliens (Field OYerllead)

EarUlwork Subcontractor

Labor
Eqwp. Rental
Ownership Q,sts

- 30 -

"TIA
G&AExpense

Elcctrlcal Sallcontrador
Protil

Bnnd

GRAND TOTAL(S):

IN mrs BLOCK THE CON'IRACTING omCER SUMMARIZES 111B NEOOTIATIONS AND EXPLAINS ANY DIFFERBNCBS BBTWEBN INDEPENDENT
GOVERNMENT ESTIMATB/AUDIT!TECHNICAL ANALYSIS AND AWARD AMOUNT. 1HB CON1RAC11NO OFFICER MUST ALSO DOCUMENT"FAIR &
REASONABLENESS OP AWARD."
,

Date

Attachment B

APPENDIX V

Contracting Offi1.1er

APPENDIX V
U.S. Department of Justice

Attachment. 2

Federal Bureau of Prisom

·-------·-····

···-·····

----

"'----··----·· ·-------·--······-·•···-·----Wus.lli11g1011. DC i!Olj4

December 7, 2001

MEMORANDUM FOR ALL CONTRACTING OFFICERS
CONSTRUCTION CONTRACTING SECTION

FROM,

/)

~£

~ y and Cons

SUBJECT:

Processing Payment Applications

This memorandum concerns the processing of Payment Applications.
Recently, the payment application process has been the subject of
review and discussion. Therefore, this memorandum is being
issued to provide further clarification of previously issued
policy and procedures.

As you all know, processing of payments begins with submission of
invoices or vouchers by the contractor, usually monthly, with
documentation supporting the claimed costs.
The Contracting Officer and the Contracting Officer's Technical
Representative (COTR) should review the invoices or vouchers to
determine whether the amounts are appropriate for payment. The
COTR's technical background and knowledge of the contractor's
progress will aid in evaluating the items and amounts submitted
for payment. The depth of the Contracting Officer's review
depends on the contract type, but at a minimum the following
specific actions should be accomplished before payment is made:
1.

2.

Date stamp all copies of the invoice the day of receipt
and process the invoice for payment in a timely manner
as prescribed by the prompt Payment Act;
Check the mathematical computations of the invoice for
accuracy, and balance to modified contract amount and
previously paid invoice amounts;

- 31 -

APPENDIX V
Attachment 2

3.

4.
5.
6.

7.
8.

9.
10.

Check the invoice against the contract prices and
terms;
Reject the invoice if it is incorrect, and return it to
the contractor within 7 days of receipt;
Check to assure that the requirement for which the
invoice covers has been received and accepted;
Route a copy to the COTR by close of business the day
of receipt, and obtain a payment recommendation from
the COTR within 5 days of receipt by their respective
office;
Identify and document any required withholdings or
deductions (liquidated damages, deductions for services
not received, retainage);
Approve payment amount and forward to the Central
Office Business Office (COBO) for payment within 2 days
of receipt from COTR.
Explain to the contractor any differences between the
amom1t of the invoice and what is approved for payment;
and
Retain copies of all payment files in the contract file
under flap D.

It is the Contracting Officer's responsibility to ensure that
COBO receives a memorandum, when transmitting the initial
contract award and each approved payment application, indicating
the appropriate Prompt Payment Act payment terms (14 or 30 days).
In addition, the approved payment application memo should also
identify the designated billing office per the contract, and
indicate when the correct payment application was received by the
designated billing office.
Please review, retain, and utilize this memorandum as
appropriate. If you have any questions, please let me know.

- 32 -

APPENDIX V

U.S. Departmeat of Justice

Attachment 2

Federal Bureau of Prisons

Washmglon, DC 2'»:U

May 31, 2002

MEMORANDUM

FROM:

SUBJECT;

FOR ALL CONTRACTING OFFICERS
CONSTRUCTION CONTRACTING SECTION

~ ifL

Smith,
Const

iet°
tion Branch

Design-Build Contracts - Billing Invoices

This memorandum concerns Design-Build contract billing invoices.
Recently, it has come to my attention that there may be some
confusion regarding determining the location that invoices should
be submitted to by the contractor to determine payment due dates
on our Design-Build contracts. Therefore, this memorandum is
being submitted to provide clarification.
Once the Design-Build contract has been awarded and the
modification executed to transfer administration to the
construction site, invoices should be submitted to that
construction site. Additionally, the modification (Standard Form
30) should also clearly state the address (construction site} for
where the invoices should be submitted.
This clarification is intended to help ensure payments are
processed timely and in accordance with the Prompt Payment Act.
If you have any questions, please let me know.

- 33 -

APPENDIX VI
OFFICE OF THE INSPECTOR GENERAL, AUDIT DIVISION
ANALYSIS AND SUMMARY OF ACTIONS NECESSARY
TO CLOSE REPORT
Recommendation Number:
1.

Resolved. According to the BOP, its contracting officers have properly
documented the justifications for exceeding the IGEs for the three
modifications noted in this report. This recommendation can be closed
when we receive supporting documentation confirming that the BOP
adequately documented the negotiated amounts exceeding the IGEs.

2.

Closed.

3.

Resolved. The BOP stated that it would not approve the $1.6 million
modification without proper justification and documentation. This
recommendation can be closed when the BOP provides supporting
documentation at the completion of the USP Victorville project that
confirms that the modification in question was not approved.

4.

Closed.

5.

Resolved. According to the BOP, it recovered the erroneous $614
interest payment by issuing a bilateral modification, Number 29, dated
December 28, 2001. In addition, on June 20, 2002, the BOP paid
interest for the three late payments. This recommendation can be
closed when we receive supporting documentation confirming that
these actions have been taken.

6.

Closed.

- 34 -