Conditions: You are assigned as a Contingency Contracting Officer (CCO) and have access to current acquisition regulations, local procedures, and required automation and office supplies. You have been assigned to explain recurring issues that arise in construction contracts, especially in a contingency environment.
Standards: Identified the recurring issues associated with construction contacts and ability to mitigate in order for the supported district to continue Construction Contract placement.
Performance Steps:
1. Explain the types of recurring issues in construction contracts. These include:
a. Differing site conditions. Refers to subsurface or latent physical conditions at the site differing materially from those indicated in the contract; or unknown physical conditions at the site, of an unusual nature, differing materially from those ordinarily encountered and generally recognized as inherent in work of the character provided for in the contract. During a contingency, insufficient geotechnical analysis and/or unknown underground conditions can greatly affect contract performance.
b. Quality of Materials. If material specifications are not clear in a contract, the contractor likely will provide the minimum quality. Even if specified, the contractor may attempt to substitute lesser quality materials. This is especially true in countries without high quality building standards and enforcement mechanisms.
c. Buy American Act. The Buy American Act (41 U.S.C. 10a-10d) provides a preference for domestic construction material. It is implemented by FAR 52.225-9 in solicitations and contracts for construction that is performed in the United States valued at less than $7,804,000. Exemptions to the clause may be due to: information technology that is a commercial item; foreign construction material if US material cost would be unreasonable; enforcement is impracticable or inconsistent with the public interest; or domestic material cannot be produced in the time or quantities needed.
d. Electrical and plumbing standards and general Contractor Quality Control issues. Standards throughout the world are not the same as in developed countries. As with materials in general, unless the local standards for electrical and plumbing materials, and workmanship, are nationally set and enforced, the quality of these specialized trades can be dangerous. Further, as these trades’ work is not easily checked for quality (inside walls and floors), poor work can be easily hidden—Quality Assurance must be enforced diligently.
e. Non-payment of subcontractors. Privity of contract only exists between the US Government (USG) and the prime contractor. A prime may not pay subcontractors on time, or at all, depending on their business ethics or financial stability. This is especially true in an austere environment, where the host country may not even have a labor department to redress employee grievances.
f. Security issues. Contract performance on a military (or other secure) installation can pose burdens on both the requiring activity and contractor: personnel clearance, vehicle and material access, badging, escort, etc. Further, in a hostile environment contractors may have to provide for heightened security at the worksite, perhaps even working under extreme threat of terrorism.
g. Understand debt collection procedures unique to USACE. In construction contracting both performance and payment bonds are required to ensure that construction will be completed and subcontractors will be paid. The surety will ensure the collection of debt and legal obligations. Further,
Chapter 2, p 127
retainage can be withheld pending completion of portions of construction, and liquidated damages withheld for late completion.
h. Schedules, poor standards and performance, which could lead to contract termination.
Schedule and quality issues exist in all construction contracts but usually do not lead to termination.
During contingencies, frequently there are only a few qualified contractors so termination carries severe implications for ultimate contract fulfillment. Although schedule and quality can be much poorer in an austere environment than in the US, leading to termination, the implications can be more severe as well.
i. Termination and re-procurement procedures (see references for AEN Termination SOP).
Funds in any environment are limited. Under termination for convenience the USG must bear any re-procurement costs. Under termination for default the terminated contractor must bear those costs, but in an austere environment it may not have the financial capacity to do so.
j. Cultural issues and communication/language barriers. All USG contract communication occurs in English. Much of this communication can be complicated and legalistic; what is a challenge for
Soldiers to understand might be extremely difficult for a local national, easily leading to complete misunderstanding. In many cultures contractors will never admit misunderstanding—they would “lose face.”
k. Safety standards or lack thereof. As with material and workmanship standards, contractors may cut corners to realize higher profit. In an austere environment there may be no standards set, or no enforcement mechanism. USACE has an obligation to ensure the basic safety of all employees under their contracts.
l. Combating Trafficking in Persons. It is a violation of federal law to in any way support trafficking in persons (TiP), specifically as a result of contract employment (see FAR 22.17). Several mechanisms are in place to combat TiP overseas, adding to contract complexity.
m. User requested changes. Inevitably design changes are requested during construction execution, resulting in contract modifications. These can drastically change the scope of the contract, period of performance, and can add performance risk (changing a portion of the design may affect the overall structural soundness). These risks are multiplied in an austere environment where schedules are usually compressed already, and work quality is suspect.
NOTE: Warranties. The manufacturer’s warranty is transferred to the government at time of acceptance.
The typical warranty period for construction contracts is one year. However, if the manufacturer’s warranty provides for a longer warranty period, the manufacturer’s warranty prevails.
NOTE: Issue Specific to Afghanistan: USG construction contracting procedures are largely predicated upon a viable bonding mechanism. Absent this fundamental protection in Afghanistan, USG construction contracting processes/procedures have proven sub-optimal/inadequate – particularly with respect to Performance, Payments/Wages, Anti-Corruption and Capacity Development.
NOTE: Many issues arise that are not on the list above. Government contracting professionals find that each day in contracting brings new issues, and Contracting Officers (KOs) and leaders have to find the most expeditious and fair way of dealing with issues. A KO’s job is to be a business advisor to the USG and ensure a win/win for both the government and the contractor. The USG demands delivery of best value for its contracts, and in turn provides the contractor with a reasonable profit.
Evaluation Preparation and Guidance: Brief the Soldier on recurring issues with construction contracts and provide them sufficient information that they would be able to explain the steps for and ways to find solutions to recurring construction issues.
Performance Measures: GO NO-GO
1. Explain recurring construction issues. _____ ______
2. Explain specific issues relating to a contingency environment. _____ ______
3. Explain the type of terminations and re-procurement process. _____ ______
4. Explain USACE debt collection procedures. _____ ______
References: (See DVD for References)
Open the NCO Contracting website at https://kme.usace.army.mil/CoPs/Contracting/default.aspx.
Accessing this site first will allow the hyperlinks to open.
1. AEN Terminations SOP
2. Bona Fide Needs Advisory 18 SEP 2008 3. Buy American Act
4. Buy American Act Domestic Non-Availability Determination Information 5. Buy American Act Policy Review
6. Buy American Act Waiver Briefing 7. Construction Contract Initiatives (CCI) 8. Constructive Use of Bid Savings 9. Do’s and Don’ts for CORs and QAs 10. ECB 2010-14, Energy Savings Increase
11. EM 385-1-1, Safety and Health Requirements Manual, 2008, English 12. Email Contract Pricing Reference Guides Tool Goes Live on the Web 13. ER 415-1-15, Construction Time Extensions for Weather
14. ER 415-345-18, Construction Transfer and Warranties 15. ER 1180-1-6, Construction Quality Management
16. FAR 36 /DFARS 236 /PGI 236 / AFARS 5136/ EFARS Part 36, Construction and Architect-Engineer Contracts
17. FAR 52.232-5http://farsite.hill.af.mil/reghtml/regs/far2afmcfars/fardfars/far/52_232.htm#P31_3455, Payments Under Fixed-Priced Contracts
18. FY11 PROSPECT Course 366 Construction Contract Administration Student Manual 19. LD Calculator
Chapter 2, p 129 20. NWD Construction Contract Improvement Time
21. NWD Policy Statement on LDs for Foregone Revenue 22. PIL 2011-01 Project Labor Agreements
23. PIL 2011-09 Electronic Software for Davis Bacon Act Payrolls 24. Project Labor Agreements FAQs
25. Unbalanced Bids Info Paper
26. USACE Tribal Policy Principles, May 2010
Task 3-15
COORDINATE WITH, PREPARE FOR AND RESPOND TO AUDITS AND INSPECTIONS