Audit
Report
Policies and Procedures Used for Iraq Relief and
Reconstruction Fund Project Management -
Construction Quality Assurance
Report No. SIGIR 05-012 July 22, 2005
Office of the Special Inspector General for Iraq Reconstruction

SPECIAL INSPE CTOR GENE RAL FOR IRAQ RECONSTRUCTION
July 22, 2005
MEMORANDUM FOR DIRECTOR, PROJECT AND CONTRACTING OFFICE
COMMANDER, GULF REGION DIVISION, U.S. ARMY
CORPS OF ENGINEERS
SUBJECT: Policies and Procedures Used for Iraq Relief and Reconstruction Fund
Project Management - Construction Quality Assurance
(Report No. SIGIR 05-012)
We are providing this audit report for your information and use. We performed the audit
in accordance with our statutory duties contained in Public Law 108-106, as amended,
which mandates the independent and objective conduct of audits relating to the programs
and operations funded with amounts appropriated or otherwise made available to the Iraq
Relief and Reconstruction Fund. Public Law 108-106, as amended, requires that we
provide for the independent and objective leadership and coordination of and
recommendations on policies designed to promote economy, efficiency, and effectiveness
in the administration of such programs and operations and to prevent and detect waste,
fraud, and abuse.
This report does not contain recommendations, therefore, no written response to this
report is required. We appreciate the courtesies extended to our staff. For additional
information on this report, please contact Mr. James P. Mitchell at jim.mitchell@sigir.mil
or at (703) 428-1100. For the report distribution, see Appendix D.
Stuart W. Bowen, Jr.
Inspector General
400 Army Navy Drive • Arlington, Virginia 22202

Special Inspector General for Iraq Reconstruction
Report Number SIGIR 05-012 (Project No. D2005-DCPAAP-0005)
July 22, 2005
Policies and Procedures Used for Iraq Relief and Reconstruction Fund
Project Management – Construction Quality Assurance
Executive Summary
Introduction. In May 2005, we initiated an audit to determine whether the policies,
procedures, and internal controls used by U.S. government organizations resulted in the
effective management of Iraq reconstruction projects. This audit report is the first of a
series of reports addressing policies and procedures used by U.S. government
organizations within Iraq to manage reconstruction projects funded by the Iraq Relief and
Reconstruction Fund. This report discusses policies and procedures used for construction
quality management.
Objective. The objective of this audit was to identify the policies, procedures, and
internal controls established by U.S. government organizations for monitoring and
reviewing Iraq reconstruction projects.
This information was obtained as part of a broader review of the effectiveness of the
U.S. government’s policies, procedures, and internal controls, and whether those policies,
procedures, and internal controls are adequately coordinated by and among
U.S. government organizations and sufficiently consistent for the effective management
and timely completion of Iraq reconstruction projects. We plan additional reviews to
determine the effectiveness of these policies, procedures, and internal controls and the
adequacy of their coordination.
Results. The Project and Contracting Office and the U.S. Army Corps of Engineers, the
two major organizations involved in Iraq Relief and Reconstruction Fund projects, have
issued written policies and procedures for establishing and managing construction quality
management programs for reconstruction projects funded by the Iraq Relief and
Reconstruction Fund.
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Table of Contents
Executive Summary i
Introduction
Background 1
Objective 1
Finding
Policies and Procedures 3
Appendixes
A. Scope and Methodology 4
B. Project and Contracting Office Standard Operating Procedures 5
C. Acronyms 7
D. Report Distribution 8
E. Audit Team Members 10

Background
Introduction
In May 2005, we initiated an audit to determine whether the policies, procedures, and
internal controls used by U.S. government organizations resulted in the effective
management of Iraq reconstruction projects. This audit report is the first of a series of
reports addressing policies and procedures used by U.S. government organizations within
Iraq to manage reconstruction projects funded by the Iraq Relief and Reconstruction Fund
(IRRF). This report discusses policies and procedures used for construction quality
management.
Construction Quality. Obtaining quality construction is a combined responsibility of
the construction contractor and the government. The contract documents should specify,
establish, and clearly define the quality of materials and workmanship required for a
construction project. Construction contractors must comply with the contract’s terms and
produce the required product. Certain civil works structures specify a construction
procedure in lieu of an end-product. In such instances, contractors are responsible for the
specified procedure and the government must verify design assumptions, project control,
and assure the end-product quality.
Contractors are responsible for all activities necessary to manage, control, and document
work so as to ensure compliance with the contract terms, plans, and specifications.
Accordingly, the contractor develops and implements a contractor quality control system
to manage, control, and document all construction activities and other functions related to
delivering quality construction.
Government Quality Assurance. Government quality assurance is the process by
which the government assures end product, project, or specified procedural quality. The
government quality assurance process starts well before construction and continues
through acceptance of completed construction. While government quality assurance is
required on all construction contracts, the extent of government quality assurance activity
should be commensurate with the value and complexity of the contracts involved. In any
case, effective monitoring and review of construction activity by the government is
paramount to ensure that completed construction projects are compliant with contract
specifications.
Management of Iraq Reconstruction Projects. The Project and Contracting Office
(PCO) and the U.S. Army Corps of Engineers (USACE) are the two major organizations
involved in the management of IRRF related projects. The PCO is responsible for all
activities associated with asset, financial, program, and project management and for
managing both construction and non-construction activities.
Objective
The objective of this audit was to identify the policies, procedures, and internal controls
established by U.S. government organizations for monitoring and reviewing Iraq
reconstruction projects.
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This information was obtained as part of a broader review of the effectiveness of the
U.S. government’s policies, procedures, and internal controls, and whether those policies,
procedures, and internal controls are adequately coordinated by and among
U.S. government organizations and sufficiently consistent for the effective management
and timely completion of Iraq reconstruction projects. We plan additional reviews to
determine the effectiveness of these policies, procedures, and internal controls and the
adequacy of their coordination.
For a discussion of the audit scope, methodologies, and prior coverage, see Appendix A.
For definitions of the acronyms used in this report, see Appendix C. For a list of the audit
team members, see Appendix E.
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Policies and Procedures
The PCO and the USACE, the two major organizations involved in IRRF projects, have
issued written policies and procedures for establishing and managing construction quality
management programs for reconstruction projects funded by the IRRF.
Project and Contracting Office
The PCO manages approximately $13 billion of the IRRF program, of which
approximately $8.7 billion has been apportioned for construction projects, and is
responsible for all activities associated with construction. Its policies and guidance for
establishing construction quality management procedures are detailed in its standard
operating procedures. Between June and December 2004, the PCO issued more than
100 standard operating procedures, and we identified 42 that were related to construction
and contracting quality management. The procedures range from conducting
construction quality control and assurance inspections to final inspection, acceptance, and
transfer of construction. According to a senior PCO official, these procedures
supplement the USACE regulation, which also applies to PCO managed projects. A list
of the PCO Standard Operating Procedures that apply to construction quality
management is provided in Appendix B.
U.S. Army Corps of Engineers
USACE Regulation 1180-1-6, “Construction Quality Management,” September 30, 1995,
provides the general policy and guidance for establishing quality management procedures
in the execution of USACE construction projects. The regulation is based on
requirements in the Federal Acquisition Regulation and applies to all USACE elements,
major subordinate commands, districts, and field operating activities responsible for
awarding and supervising construction contracts. Essentially, the regulation recognizes
that obtaining quality construction is a combined responsibility of the construction
contractor and the government. On the government side, the process starts before
construction and includes reviews of plans and specifications for biddability,
constructability, operability, and environmental responsibility; plan-in-hand site reviews;
coordination with using agencies or local interests; establishment of performance periods
and quality control requirements; field office planning; preparation of quality assurance
plans; and reviews of quality control plans. During construction, the government is
responsible for enforcement of contract clauses, maintenance of quality assurance and
quality control inspection and work records, and acceptance of completed construction.
On the contractor side, contractors are responsible for all activities necessary to manage,
control, and document work so as to ensure compliance with the contract terms and
specifications. The contractor’s responsibilities include ensuring adequate quality control
services are provided for work accomplished on- and off- site by the contractor,
suppliers, subcontractors, technical laboratories, and consultants. The work activities
include safety, submittal management, and all other functions relating to the requirement
for quality construction.
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Appendix A. Scope and Methodology
To obtain information on construction quality management policies and procedures, we
reviewed portions of the Federal Acquisition Regulation and the U.S. Army Corps of
Engineers Regulation 1180-1-6, “Construction Quality Management,” September 30,
1995, applicable to construction quality management and discussed these regulations
with professional engineers experienced in Iraq reconstruction1
.
We also reviewed the Project and Contracting Office’s Standard Operating Procedures
Index to identify those procedures applicable to construction quality management and
obtained and reviewed all applicable procedures for completeness. We also discussed
these procedures with senior Project and Contracting Office officials.
We conducted this performance audit from May through July 2005, in accordance with
generally accepted government auditing standards.
Scope Limitation. We did not test the adequacy of the Federal Acquisition Regulations,
the U.S. Army Corps of Engineers regulation, or the Project and Contracting Office
Standard Operating Procedures. We plan to test the adequacy of regulations, policies,
procedures, and internal controls and the implementation of that guidance in a series of
on-site reviews and will report our results in a future audit reports.
Prior Coverage. There were no audits performed in the past five years with the same or
similar objectives as this audit.
1 The professional engineers were the Project and Contracting Office’s Deputy for Operations; the Project
and Contracting Office Government Water Sector Project Manager; and the Special Inspector General for
Iraq Reconstruction’s Senior Project Technical Manager.
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Appendix B. Project and Contracting Office
Standard Operating Procedures
Updated: 3/31/05
PROCEDURE
NUMBER
EFFECTIVE
DATE
Contracting
Contracting primer CM-100 11/05/04
Contractor invoicing CM-101 06/30/04
Evaluate contractor performance and administer fee boards CM-102 11/05/04
Conduct negotiations of scope and price for db task orders CM-103 06/30/04
Management of contractor-acquired government property CM-104 07/05/04
Identification and appointment of contracting officer’s representatives CM-105 11/05/04
Adjust award fee plan evaluation criteria CM-106 11/05/04
Construction
Conduct construction contractor quality control and assurance inspection CN-100 06/20/04
Prepare project construction management plan CN-101 06/17/04
Contractor quality control and assurance construction deficiency tracking CN-102 06/29/04
Contractor construction quality control plan CN-103 06/20/04
Construction contractor quality control assurance mutual understanding meeting CN-104 06/29/04
Construction submittal review process CN-105 06/20/04
Biddability, constructability, operability, and environmental reviews CN-106 06/20/04
Process construction interim payments (cost plus) CN-107 12/19/04
Accident prevention plan CN-108 06/20/04
Schedule update and progress payment for firm fixed-price construction CN-109 12/19/04
Develop construction submittal register CN-110 06/30/04
Preconstruction conference CN-111 06/30/04
Processing construction contractor performance evaluations CN-112 06/30/04
Request for information-construction CN-113 06/30/04
Preparation of as-built drawings CN-114 07/05/04
Construction project photographs CN-115 06/30/04
Develop project security plan CN-116 06/30/04
Operation and maintenance training CN-117 06/30/04
Final inspection, acceptance, and transfer of construction CN-118 Rev 1 12/25/04
Develop operation and maintenance manuals CN-119 06/30/04
System startup and commissioning CN-120 07/05/04
Process modification for changes (directed and constructive) CN-121 07/15/04
Process modification for differing site condition CN-122 06/30/04
Process modification for excusable delay CN-123 07/05/04
Process modification for user requested change CN-124 06/30/04
Designation of procuring, administrative, and termination contracting officers CN-125 07/05/04
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Process suspension of work (ordered and constructive) for construction CN-126 07/05/04
Resolving contract disputes and claims CN-127 12/19/04
Terminations for the convenience of the government and for default CN-128 12/19/04
Beneficial occupancy CN-129 07/05/04
Task order final payment and closeout (cost plus) CN-130 12/19/04
Contractor quality control factory testing CN-131 12/19/04
Warranty repair procedures CN-132 07/05/04
Accident investigation and reporting CN-133 06/29/04
Preservation of historical, archeological, and cultural resources CN-134 07/05/04
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Appendix C. Acronyms
IRRF USACE Iraq Relief and Reconstruction Fund
PCO Project and Contracting Office
U.S. Army Corps of Engineers
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Appendix D. Report Distribution
Department of State
Secretary of State
Senior Advisor/Coordinator for Iraq
U.S. Ambassador to Iraq
Director, Iraq Reconstruction Management Office
Inspector General, Department of State
Department of Defense
Deputy Secretary of Defense
Director, Defense Reconstruction Support Office-Iraq
Under Secretary of Defense (Comptroller)/Chief Financial Officer
Deputy Chief Financial Officer
Deputy Comptroller (Program/Budget)
Inspector General, Department of Defense
Department of the Army
Assistant Secretary of the Army for Acquisition, Logistics, and Technology
Principal Deputy to the Assistant Secretary of the Army for Acquisition, Logistics,
and Technology
Deputy Assistant Secretary of the Army (Policy and Procurement)
Director, Project and Contracting Office
Assistant Secretary of the Army for Financial Management and Comptroller
Commander, U.S. Army Corps of Engineers
Commander, Gulf Region Division
Auditor General of the Army
Other Defense Organizations
Director, Defense Contract Audit Agency
Other Federal Government Organizations
Director, Office of Management and Budget
Comptroller General of the United States
Inspector General, Department of the Treasury
Inspector General, Department of Commerce
Inspector General, Department of Health and Human Services
Inspector General, U.S. Agency for International Development
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Congressional Committees and Subcommittees, Chairman and
Ranking Minority Member
U.S. Senate
Senate Committee on Appropriations
Subcommittee on Defense
Subcommittee on Foreign Operations
Senate Committee on Armed Services
Senate Committee on Foreign Relations
Subcommittee on Near Eastern and South Asian Affairs
Subcommittee on International Operations and Terrorism
Senate Committee on Homeland Security and Governmental Affairs
Subcommittee on Government Efficiency and Financial Management
Subcommittee on Financial Management, the Budget, and International Security
U.S. House of Representatives
House Committee on Appropriations
Subcommittee on Defense
Subcommittee on Foreign Operations, Export Financing and Related Programs
House Committee on Armed Services
House Committee on International Relations
Subcommittee on Middle East and Central Asia
House Committee on Government Reform
Subcommittee on Government Efficiency and Financial Management
Subcommittee on National Security, Emerging Threats and International Relations
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Appendix E. Audit Team Members
The Office of the Assistant Inspector General for Auditing, Office of the Special
Inspector General for Iraq Reconstruction, prepared this audit report. The Office of the
Special Inspector General for Iraq Reconstruction staff members who contributed to the
report include:
Michael A. Stanka, PE
William J. Whitehead
Lloyd E. Wilson
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