Federal Bureau of Prisons Management of Construction Contracts

Report No. 02-32
August 2002
Office of the Inspector General

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.