Prisons bureau improves contract management, but must watch costs

The Bureau of Prisons has improved its overall management of prison construction contracts, but cost overruns and late payments to contractors are still a problem, according to a new report from the Justice Department's inspector general.

Prison overcrowding over the last four years has forced the bureau to implement a $1.6 billion prison construction program, and the agency is now building 13 new prisons. A 1998 IG audit found that the agency misspent $18.5 million in its construction program and recommended that the agency implement internal management and oversight controls to prevent further losses. In March, the General Accounting Office reviewed the bureau's construction program and found that controls had been adopted and problems were minimal. But a new IG report found problems in the bureau's construction program similar to those identified in 1998. Specifically, the IG uncovered $1.6 million in unneeded proposed contract changes and three other changes totaling $306,679, which exceeded the government's estimate for costs. "It is important that the BOP approve only modifications that are necessary and reasonably priced," the report said. The IG also identified four late payments to contractors where the agency did not pay interest to the contractor, as required under the Federal Acquisition Regulation (FAR). The FAR regulates federal contractor and acquisition activities. To remedy the situation, the Justice IG said bureau officials should renegotiate the $306,679 in changes to meet its budget estimates and make sure that any future changes to contracts that exceed the government's estimated costs are justified. Future contract changes should be well documented and the agency should not approve the proposed $1.6 million in changes, and the bureau must pay construction contractors interest on late payments, the report said. In June, the agency paid interest on three late payments to one contractor. "BOP has a quality assurance program in place and appears to adequately monitor the quality and timeliness of the general contractors' work," the report said. The bureau agreed with the report and said it would discuss the IG's recommendations with new program staff.