Under growing schedule pressure to turn out safer and more secure embassies around the world, but with tighter budgets, the U.S. State Dept.'s Overseas Building Operations Bureau is ramping up its construction output. Some new process changes in the $17.5-billion program are also the result of growing pains that have become apparent this year.

New Berlin embassy, to open in 2008, is among 36 major projects in process.

At an annual event for current and prospective OBO contractors, agency Chief Operating Officer Charles E. Williams reported that 36 new embassy and annex facilities worth about $3.2 billion are under construction, 31 have been completed in the last six years and more than 76 "long range" projects, valued at about $6.5 billion, are planned. Williams compared the results to the 1990s when the department completed one new embassy a year.

The Oct. 10 event in Arlington, Va., drew 500 participants and followed by two weeks OBO's award of 11 new design-build and other contracts, worth a total of $365 million. Four more contracts, in Lebanon, Africa and Pakistan, are set for award by Christmas. They have been delayed by security concerns.

The event allowed OBO to introduce program changes to comply with tighter schedules. But also was a result of growing concerns among existing contractors about what they claim is more risk on overseas projects.

On May 16, Associated General Contractors sent a letter to Rep. Pete Sessions (R-Texas), vice chair of the House legislative and budget process subcommittee, expressing concern over "risk allocation and the increasing dollar volume of change orders" in the embassy program. At the time, AGC claimed change orders were "in the neighborhood" of $150 million. The letter included a four-page "white paper" detailing a litany of concerns, from "arbitrary schedule durations" to contractor responsibility for changed site conditions.

Several embassy contractor executives echo the white paper concerns, but none publicly. "We used to have a much more collaborative environment to work in," says one. "It's not there anymore."


In a May 23 response to the AGC letter, Williams defended OBO's change order approach and project schedule duration, and noted process changes to boost contractor efficiency. He also "took exception that we have not engaged in meaningful dialogue with the industry."

At the Oct. 10 gathering, Williams emphasized recent changes instituted by OBO regarding risk allocation to "level the playing field." Of 13 major risks presented by Williams, OBO will assume eight. Among key risks allocated to OBO is site conditions, an issue he said has been "one of the most concerned areas of the last five years." Other risks allocated to OBO include host country approvals such as zoning, design changes outside its standardized design, design review delays and change order management. Contractors will be partly or fully responsible for security, a 15-to-28-month project schedule, currency fluctuation, timely submittals and construction permits.

With budgets tighter, State is pushing OBO toward a "lean management" approach. Among belt-tightening measures it is instituting is more process flexibility, which would allow those working abroad to more easily procure services, such as replacing a roof, said Williams. "This will help you as a private sector partner because it eliminates the bureaucracy that gets in your way," he said.

Williams added that as part of the lean management approach, OBO is reviewing State Dept. operations and maintenance practices and responsibility for its procurement. That review follows a July 2006 report by the U.S. Government Accountability Office that criticized State's O&M planning as lacking, particularly as more facilities come on line.

Some program contractors did not win current contracts, or even bid, executives say. "You're destined to fail before you start," says one. Williams claims there were enough bidders for this round and defends program changes. "I can't run the program cost-reimbursable," he told ENR. "It will go into the tank."