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.

Recommendation #1: Remedy the $306,679 in questioned costs for contract modifications that exceeded the IGEs.

Response: The BOP agrees with the OIG recommendation, with the exception of the reference to Modification 260 regarding security enhancements and additional CCTV cameras at USP Victorville.

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.

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 802 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 28U 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.

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.

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