SIGAR

Special Inspector General for
Afghanistan Reconstruction

SIGAR 15-74 Inspection Report

$14.7 Million Warehouse Facility at Kandahar
Airfield: Construction Delays Prevented the
Facility from Being Used as Intended

JULY

2015
SIGAR 15-74-IP/DLA Warehouses at Kandahar Airfield

 July 15, 2015
Department of Defense Commands:
This report discusses the results of SIGAR’s inspection of the Defense Logistics Agency (DLA) warehouse
facility construction project at Kandahar Airfield (KAF). We found that the $14.7 million warehouse facility was
well built, but lengthy construction delays led to the facility never being used as intended. Had the facility
been completed on schedule, DLA would have been able to use it for more than 2 years before the agency’s
mission in Kandahar ended in 2014. We also found that the U.S. Army, which developed the requirement for
the warehouses, did not take action to prevent more than $400,000 in modifications from being made to the
project after the August 2013 decision was made to end DLA’s mission in Kandahar. A U.S. military official
working with the Afghan Base Closure Commission indicated that, because the facility would not be used by
DLA, it would likely be transferred to the Afghan government.
We recommend that the Commander, U.S. Central Command (CENTCOM), direct the Commander, U.S.
Forces–Afghanistan (USFOR-A) to determine and identify, and report back to SIGAR within 90 days, who made
the decision, and why, to allow contract modifications to be made and additional funds to be spent on the
warehouses after the decision was made in August 2013 to end DLA’s mission in Kandahar.
CENTCOM and USFOR-A provided written comments on a draft of this report, which are reproduced in
appendices II and III, respectively. DLA did not provide a formal written response, but it did provide technical
comments, which we incorporated into the report, as appropriate.
In its comments, CENTCOM concurred with the report. With regard to the recommendation, CENTCOM noted
that USFOR-A would need to conduct an investigation to determine who made the decision, and the reasons
why, that led USACE to modify the contract seven times, with six of the modifications adding a total of more
than $400,000 to the contract price. CENTCOM advised that it may take USFOR-A more than 90 days to
conduct an “investigation that involves personnel no longer in Afghanistan, and perhaps in the U.S.
Government.” In accordance with our normal procedures, we will monitor implementation of actions taken as
part of our regular recommendation follow-up activities. Lastly, in its written response, USFOR-A stated that it
reviewed the draft report and had no comments.
SIGAR conducted this inspection under the authority of Public Law No. 110-181, as amended, and the
Inspector General Act of 1978, as amended; and in accordance with the Quality Standards for Inspection and
Evaluation, published by the Council of the Inspectors General on Integrity and Efficiency.

John F. Sopko
Special Inspector General
for Afghanistan Reconstruction

 DEPARTMENT OF DEFENSE COMMANDS
The Honorable Ashton B. Carter
Secretary of Defense
General Lloyd J. Austin III
Commander, U.S. Central Command
General John F. Campbell
Commander, U.S. Forces–Afghanistan and
Commander, Resolute Support
Lieutenant General Thomas P. Bostick
Commanding General and Chief of Engineers,
U.S. Army Corps of Engineers
Lieutenant General Andrew E. Busch
Director, Defense Logistics Agency

 In 2009, the U.S. Army developed contract requirements for the construction of a Defense Logistics Agency
(DLA) warehouse facility at Kandahar Airfield (KAF).1 At the time, DLA did not have a distribution facility in
Afghanistan. Instead, the agency was moving materials through distribution facilities located outside of the
country. The planned facility was intended to be used as a distribution facility at Kandahar, which would allow
for in-country receipt, storage, and issuance of DLA-owned material to customers throughout the Afghan
theater of operations. The U.S. Army developed the requirement, the U.S. Army Corps of Engineers (USACE) was
the contracting agency and project manager, and DLA was the intended customer.
On September 15, 2010, USACE awarded a $13.5
Photo 1 - Warehouse Building at KAF
million firm-fixed-price contract to YDA AFCON Joint
Venture (YDA AFCON), a partnership between two
Turkish construction companies, to design and build
a DLA warehouse facility at KAF.2 The contract
required construction of four shipping and receiving
warehouses, an administration building, and
supporting facilities. (Photo 1 shows one of the
warehouses at KAF.) The scope of work required
construction of a permanent, non-combustible,
general purpose warehouse facility with 173,428
square feet of floor space among the four
warehouses. The warehouses were to be preengineered metal buildings with heating, ventilation,
and air conditioning for the storage areas. The
Source: SIGAR, November 12, 2014
administration building was to be about 1,720
square feet. Supporting facilities included asphaltpaved roadways and aprons, crushed stone truck parking and staging areas, perimeter fencing with entry
control points, area lighting, and connection to all utilities.3 The contract required construction to be completed
by August 30, 2011, or within 300 days of the notice to proceed on November 3, 2010. On April 25, 2013,
after months of construction delays, USACE issued a partial contract termination for default.4 The contract
work items that were terminated and descoped from the contract included incomplete work on electrical
systems in the warehouses and administration building; plumbing work; the installation, testing, and
commissioning of the fire suppression and fire alarm systems; installation of the communications system; and
uncorrected deficiencies in the electrical work and construction of doors and handrails.
On May 5, 2013, USACE awarded a second firm-fixed-price contract for $844,526 to Arkel International LLC, a
United States-based construction company, to complete the warehouse project.5 The scope of work required
completion and testing of the facility’s generator power system; design and construction of prime power
connection from the KAF electrical distribution system; completion and testing of the fire suppression and
pump house systems; construction of a communications system for the four warehouses and administration
building; completion of the warehouses, including location and installation of replacements for missing,
broken, or improperly designed components; and completion of the administration building, including
DLA provides nearly all of the consumable items that U.S. military forces in Afghanistan and other countries need to
operate, including food, fuel, uniforms, medical supplies, spare parts, and construction materials.
1

2

The contract, number W912ER-10-C-0045, was funded through military construction appropriations.

3

An apron is a ground covering of concrete or other material used to protect the underlying earth from water erosion.

The government’s right to partially terminate for default is provided for under Federal Acquisition Regulation subsection
49.402-1. Under a partial termination for default, some elements of the contract are completed and accepted, but other
elements are terminated.
4

5

Contract number W5J9LE-13-C-0031.

SIGAR 15-74-IP/DLA Warehouses at Kandahar Airfield

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 connection of the water service to the existing water distribution system adjacent to the project site, and
installation of the bathroom’s plumbing fixtures. This contract had a 90-day period of performance and a
planned completion date of August 26, 2013. However, after USACE modified the contract to provide clean-up
services for the project site, make changes to the fire suppression and fire alarm systems, and hire additional
personnel to test the fire pump system and fire pump controllers, the completion date was extended to
November 10, 2013. DLA accepted the completed warehouse facility on February 3, 2014.6
For this inspection, we assessed whether (1) construction was completed in accordance with contract
requirements and applicable construction standards, and (2) the facility was being used as intended.
We conducted our work in Kabul and Kandahar, Afghanistan, from September 2014 through June 2015, in
accordance with the Quality Standards for Inspection and Evaluation, published by the Council of the
Inspectors General on Integrity and Efficiency. The engineering assessment was conducted by a professional
engineer in accordance with the National Society of Professional Engineers’ Code of Ethics for Engineers.
Appendix I contains a more detailed discussion of our scope and methodology.

DLA WAREHOUSE FACILITY WAS WELL CONSTRUCTED, BUT THE PROJECT
EXPERIENCED DELAYS AND COST INCREASES
We conducted site visits of the DLA warehouse facility on November 12, 2014, and February 5, 2015. During
these site visits, we found that construction generally met contract requirements and technical specifications.
We also found that construction was complete, and our engineering assessment determined that the
warehouse buildings and support facilities were generally well built. For example, the four warehouses were
pre-engineered metal buildings, and each warehouse was supported by metal columns with reinforced
concrete floors that appeared to be of good quality. Similarly, the paved areas around the warehouses were
reinforced concrete that appeared to be of good quality, and the administration building appeared to be well
constructed. We also observed a 1,200 cubic meter water storage tank for fire suppression along with a pump
station to deliver water to the buildings’ sprinkler system and fire hydrants.
Although we found most of the construction to be well done, we observed several minor deficiencies. For
example, the contract’s technical requirements stated that air conditioners and other mechanical or electrical
equipment located outside of the buildings should be shielded from view. 7 However, we found that the
contractor’s design documents did not include this requirement. During our site visits, we observed that the
heating, ventilation, and air conditioning units outside the warehouses and administration building were not
surrounded by a fence or some other structure to shield them from view. We also observed exterior siding that
was torn away from one of the warehouse buildings as well as cracks in the concrete steps outside another
warehouse building. Based on our engineering assessment, these deficiencies were largely cosmetic and
easily repairable. (See photos 2 and 3 showing the unshielded heating, ventilating, and air conditioning units
outside of the administration building and damaged exterior siding, respectively.)

6

The Commander of the DLA Support Team in Kandahar signed for and accepted transfer of the warehouses.

7

See contract technical requirements section 3.1.1.2.

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 Photo 2 - Unshielded Heating/Cooling Units at
Administration Building

Photo 3 - Damaged Warehouse Siding

Source: SIGAR, November 12, 2014

Source: SIGAR, November 12, 2014

Poor Performance by the First Contractor Delayed Construction of the Warehouses
DLA accepted the completed warehouse facility from USACE on February 3, 2014, more than 2 years after the
originally scheduled completion date of August 30, 2011. Project delays occurred from the outset of
construction, due primarily to YDA AFCON’s poor performance. During the project, USACE sent multiple letters
to the contractor citing unsatisfactory performance and lack of work progress. Specifically, USACE sent 12
letters to the contractor in 2011, 19 in 2012, and one in 2013. Examples of letters USACE sent to YDA AFCON
in 2011 are as follows:


On February 25, USACE sent a letter of concern stating that 38 percent of the period of performance
had elapsed and no work had been accomplished on the project.



On August 28, USACE sent a letter of concern identifying five areas of poor contractor performance,
including lack of leadership and coordination when submitting designs, failure to consistently update
monthly progress schedules, submittals that were not timely or complete, lack of experienced
personnel in the quality control program, and concrete mix and structural steel package designs that
were not in accordance with contract requirements.



On October 18, USACE sent a letter stating that the contractor’s schedule update identified a
completion date beyond the contract-stipulated completion date and that the contractor’s rate of
progress would not result in timely completion of the work.



On November 20, USACE sent a cure notice citing previous letters and associated issues that
remained unresolved.8 The cure notice stated that the contractor’s slow resolution of issues in design
submittals, material submittals, and construction delayed project completion.



On December 16, USACE issued a show cause notice stating that it was considering terminating the
contract.9

A cure notice is a letter sent to a contractor prior to terminating a contract for any reason other than late delivery. For
example, this would include the contractor’s failure to perform some provision of the contract or performance issues that
endanger performance of the contract. The written notice should describe the failure and provide the contractor 10 days
(or longer period as necessary) to “cure the failure.” See Federal Acquisition Regulation 49.402-3.
8

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 Despite the project issues and delays throughout 2011, USACE continued working with YDA AFCON and
continued sending letters of concern throughout 2012. For example, on February 14, 2012, USACE sent a
letter identifying multiple construction deficiencies, including an insufficient number of concrete placement
workers, which was slowing work progress. In another example, on April 29, 2012, USACE sent a letter stating
the contractor’s schedule management was unsatisfactory and identifying multiple project milestone dates
that the contractor missed. Further, on November 20, 2012, USACE issued a commander’s critical information
requirement, which discussed reducing the contract’s scope for work that had not been completed, such as
the fire suppression system and utility connections, and awarding another company a contract to complete the
project.10 The information requirement also noted that completion of the facility was critical for DLA’s mission
to support the storage and distribution of equipment and materials for U.S. military forces in Afghanistan.
On April 25, 2013, USACE partially terminated its contract with YDA AFCON for default because the contractor
failed to (1) furnish material and workmanship, (2) comply with life health and safety requirements, (3)
adequately staff the project, (4) pay subcontractors in a timely manner, and (5) provide adequate management
on site. USACE accepted completed work, but terminated parts of the contract associated with completing
electrical systems, installing and testing the fire suppression and fire alarm systems, installing the
communications system, and correcting a host of construction deficiencies. USACE estimated that the project
was 92 percent complete when the contract was partially terminated. Following termination, USACE modified
the contract to reduce the price by approximately $977,000.

The Construction Contract Price was Higher than Originally Planned and Continued
to Increase Even After the U.S. Army, U.S. Forces–Afghanistan, and DLA Knew the
Facility Was No Longer Needed
The total price to construct the DLA warehouse facility was $14.7 million, which was $1.2 million more than
originally planned. YDA AFCON received $13.5 million for its work on the warehouses.11 Arkel International was
awarded a separate $844,526 contract to complete the work that was not performed by YDA AFCON. However,
after a series of modifications, the price of the Arkel International contract rose to $1.2 million. We found that
some of the modifications to that contract occurred after the U.S. Army decided in August 2013 that DLA would
be leaving Kandahar and would not be using the warehouse facility.
Two months later, on October 30, 2013, DLA headquarters sent a letter directing its Kandahar staff to begin
the transition process and close all of its KAF activities by March 1, 2014. The letter stated the direction was
based on a U.S. Forces–Afghanistan memorandum dated August 27, 2013, and an Army slide brief dated
August 19, 2013. However, we found no evidence that the U.S. Army, which developed the requirement,
consulted with USACE officials regarding a reevaluation or possible descoping of the DLA warehouse project.
Instead, the project continued uninterrupted, and as the contract with Arkel International continued to be
modified, its price increased.
Between August and November 2013, USACE modified its contract with Arkel International seven times, with
six of those modifications adding a total of more than $400,000 to the contract price. For example, on August
24, 2013, USACE modified Arkel International’s contract to change the warehouse buildings’ fire suppression
9 A show cause notice may be issued to a contractor when there is not sufficient time remaining in the delivery schedule—
typically at least 10 days—to cure the problem or the contractor failed to act on a cure notice already sent. The show cause
notice advises the contractor that the government is considering terminating the contract for default and asks the
contractor to show cause why the contract should not be terminated.

A commander’s critical information requirement is a document prepared for a commander that contains information the
commander can use to understand and make a decision about an issue.

10

On April 27, 2012, the original contract price was increased to more than $14.8 million through a contract modification
to accelerate delivery of roof and wall panel items following a Pakistani border closure. However, subsequent modifications
and the termination for partial default reduced the final amount paid to YDA AFCON.

11

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 systems, which increased the contract price by $267,000. Additionally, on October 4, 2013, USACE modified
the contract to add personnel for testing the fire pump station, which increased the contract price by
$126,668. In addition to increasing the cost, these modifications pushed the project’s completion date back to
November 10, 2013, or by more than 2 1/2 months.
A DLA official said that the U.S. Army initiated the warehouse project and programmed the funds, but DLA
could not explain why the project was not terminated or why the Army did not instruct USACE to complete the
project without making further modifications that would increase the cost of the project. A U.S. military official
working with the Afghan Base Closure Commission indicated that, because the facility would not be used by
DLA, it would likely be transferred to the Afghan government.12 However, the U.S. official stated, and we have
previously reported, that the Afghan government has not always had the funds or technical capability to
operate and maintain facilities the U.S. military transfers to it.13

DLA NEVER USED THE WAREHOUSE FACILITY
DLA took possession of the warehouse facility from USACE on February 3, 2014, but it never occupied or used
the facility. Following USACE’s transfer of the KAF warehouse facility to DLA, KAF Garrison Command Base
Operations Support–Integrator (BOSI) immediately took custody of and was responsible for maintaining the
facility.14 A BOSI official stated that the facility remained empty after it took custody, with a few minor
exceptions. For example, a Department of Defense contractor used office space in the administration building
for several months in early 2014. Further, during our November 12, 2014, site visit, we observed a small
number of items stored in several warehouse buildings, including generators, tables, and file cabinets. A BOSI
official stated that as U.S. military units and contractors departed KAF, various items were temporarily stored in
the warehouses. We also observed rows of benches in one warehouse, which the BOSI official stated were
used for training civilian and military personnel.
A Resolute Support mission official said the United States plans to transfer KAF to the Afghan government by
December 1, 2015. The official told us that U.S. advisors will provide cost data on operating and maintaining
the facility to the Afghan Base Closure Commission, and the advisors can provide suggestions on how the
facility, including the warehouse facility, might be used. However, decisions about which Afghan ministry or
entity will receive the facility and how it will be used after transfer resides solely with the Afghan government.

CONCLUSION
Although the $14.7 million DLA warehouse facility was well built, lengthy construction delays led to the facility
never being used for its intended purpose. Had the facility been completed on schedule, DLA would have been
able to use the warehouse facility for more than 2 years before its mission ended in Kandahar. The U.S. Army
did not prevent USACE from modifying the second construction contract to complete the installation of fire
suppression and air conditioning systems, which increased the price of the contract by more than $400,000.

The official stated that the Afghan Base Closure Commission, comprised of officials from various Afghan ministries,
makes decisions about Afghan custody and use of facilities following U.S. closure and transfer of a base.

12

SIGAR Inspection 14-31, Salang Hospital: Lack of Water and Power Severely Limits Hospital Services, and Major
Construction Deficiencies Raise Safety Concerns, January 29, 2014; SIGAR Inspection 13-5, Imam Sahib Border Police
Company Headquarters in Kunduz Province: $7.3 Million Facility Sits Largely Unused, January 29, 2013; and SIGAR
Inspection 14-62, Baghlan Prison: Severe Damage to $11.3 Million Facility Requires Extensive Remedial Action, May 27,
2014.
13

A senior Train, Advise, Assist Command–South official stated BOSI is a U.S. military unit that consists of nine military and
nine civilian personnel responsible for maintaining structures at KAF, and assisting in their transition to Afghan government
control during the U.S. military drawdown.
14

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 Although DLA may have had the need for such systems, other inspections we conducted indicate that the
Afghans normally do not have the funds or technical capacity to operate and maintain them. Consequently, the
funds obligated by the contract modifications that followed DLA’s decision to withdraw from KAF are likely to
have been wasted.

RECOMMENDATION
To contribute to the lessons learned from U.S. reconstruction activities in Afghanistan, SIGAR recommends that
the Commander, U.S. Central Command, direct the Commander, U.S. Forces–Afghanistan to:
1. Determine and identify, and report back to SIGAR within 90 days, who made the decision, and why, to
allow contract modifications to be made and additional funds to be spent on the warehouses after the
decision was made in August 2013 to end DLA’s mission in Kandahar.

AGENCY COMMENTS
We provided a draft of this report to U.S. Central Command (CENTCOM), U.S. Forces–Afghanistan (USFOR-A),
and DLA. CENTCOM and USFOR-A provided written comments, which are reproduced in appendices II and III,
respectively. DLA did not provide a formal written response, but it did provide technical comments, which we
incorporated into the report, as appropriate.
In its comments, CENTCOM concurred with the report, which stated that the warehouses were well built but
delivered after the required completion date. With regard to the recommendation, CENTCOM noted that
USFOR-A would need to conduct an investigation to determine who made the decision, and the reasons why,
that led to USACE modifying the contract seven times, with six of the modifications adding a total of more than
$400,000 to the contract price. CENTCOM advised that it may take USFOR-A more than 90 days to conduct an
“investigation that involves personnel no longer in Afghanistan, and perhaps in the U.S. Government.” In
accordance with our normal procedures, we will monitor implementation of actions taken as part of our regular
recommendation follow-up activities.
In its written response, USFOR-A stated that it reviewed the draft report and had no comments.

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 APPENDIX I - SCOPE AND METHODOLOGY
This report provides SIGAR’s inspection results of the Defense Logistics Agency (DLA) warehouse facility at
Kandahar Airfield (KAF). For this inspection, we assessed whether (1) construction was completed in
accordance with contract requirements and applicable construction standards, and (2) the facility was being
used as intended. Specifically, we:


Reviewed contract documents, design submittals, quality assurance and quality control reports,
disbursement reports, U.S. Army Corps of Engineers (USACE) letters of concern sent to the contractors,
and other relevant project documentation;



Reviewed U.S. Army requirements documents identifying the need and funding for the project, as well
as U.S. Army briefing slides discussing the conclusion of DLA operations in Kandahar;



Conducted site inspections on November 12, 2014, and February 5, 2015; and



Interviewed USACE, DLA, KAF Garrison Command, and Resolute Support officials concerning the
facility’s construction and plans for transferring the facility to the Afghan government.

We obtained computer-processed data from USACE’s Financial Management System to help determine project
costs. We tested the data’s accuracy by comparing it with available contract documentation and determined
that it was reliable for the purposes of this inspection. We considered the impact of compliance with laws and
fraud risk.
We conducted our work in Kabul and Kandahar, Afghanistan, from September 2014 through June 2015. Our
work was conducted in accordance with Quality Standards for Inspection and Evaluation, published by the
Council of the Inspectors General on Integrity and Efficiency. The engineering assessment was conducted by a
professional engineer in accordance with the National Society of Professional Engineers’ Code of Ethics for
Engineers. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives. SIGAR performed this inspection under the authority of Public Law No. 110-181,
as amended, and the Inspector General Act of 1978, as amended.

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 APPENDIX II - COMMENTS FROM U.S. CENTRAL COMMAND

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 APPENDIX III - COMMENTS FROM U.S. FORCES–AFGHANISTAN

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 APPENDIX IV - ACKNOWLEDGMENTS
Brian Flynn, Senior Inspections Manager
Angelina Johnston, Senior Auditor
William Shimp, Senior Auditor
Ronald Snyder, P.E., Engineer
Zaki Aziz Rahman, Engineer
Hasibullah Zeer, Program Analyst

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 This inspection was conducted
under project code SIGAR-I-022.

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 SIGAR’s Mission

The mission of the Special Inspector General for Afghanistan
Reconstruction (SIGAR) is to enhance oversight of programs for the
reconstruction of Afghanistan by conducting independent and
objective audits, inspections, and investigations on the use of
taxpayer dollars and related funds. SIGAR works to provide accurate
and balanced information, evaluations, analysis, and
recommendations to help the U.S. Congress, U.S. agencies, and
other decision-makers to make informed oversight, policy, and
funding decisions to:


improve effectiveness of the overall reconstruction
strategy and its component programs;



improve management and accountability over funds
administered by U.S. and Afghan agencies and their
contractors;



improve contracting and contract management
processes;



prevent fraud, waste, and abuse; and



advance U.S. interests in reconstructing Afghanistan.

Obtaining Copies of SIGAR
Reports and Testimonies

To obtain copies of SIGAR documents at no cost, go to SIGAR’s Web
site (www.sigar.mil). SIGAR posts all publically released reports,
testimonies, and correspondence on its Web site.

To Report Fraud, Waste, and
Abuse in Afghanistan
Reconstruction Programs

To help prevent fraud, waste, and abuse by reporting allegations of
fraud, waste, abuse, mismanagement, and reprisal, contact SIGAR’s
hotline:


Web: www.sigar.mil/fraud



Email: sigar.pentagon.inv.mbx.hotline@mail.mil



Phone Afghanistan: +93 (0) 700-10-7300



Phone DSN Afghanistan: 318-237-3912 ext. 7303



Phone International: +1-866-329-8893



Phone DSN International: 312-664-0378



U.S. fax: +1-703-601-4065

Public Affairs Officer

Public Affairs



Phone: 703-545-5974



Email: sigar.pentagon.ccr.mbx.public-affairs@mail.mil



Mail: SIGAR Public Affairs
2530 Crystal Drive
Arlington, VA 22202