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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.  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 bed-space, 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 low-to medium-security facilities, known as Federal Correctional Institutions (FCI).2 USPs have highly secure perimeters, multiple- and single-occupant 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 site-specific factors.


(DEC. 2001)
(low to medium-security)
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) 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 960 118 63


14,848 $1,576 --
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, 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 on-site 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.

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:

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.

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.


  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.
  3. The FAR is the primary regulation used by federal agencies for their acquisition of supplies and services.
  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.
  5. U.S. General Accounting Office (GAO), Bureau of Prisons Contract Payments, GAO-02-508R, dated March 20, 2002.
  6. The FAR Subpart 32.9 prescribes policies and procedures for implementing prompt payment regulations relating to invoice payments on all contracts.