Waste, Fraud, and Abuse at K-Town: How Mismanagement Has Derailed DOD’s Largest Single Facility Construction Project

Opening Statement of Rep. Henry A. Waxman
Chairman, Committee on Oversight and Government Reform
Hearing on Waste, Fraud, and Abuse at K-Town: How Mismanagement Has Derailed DOD’s Largest Single-Facility Construction Project
June 28, 2007

Today’s hearing will be the seventh hearing the Oversight Committee has held this year on waste, fraud, and abuse in the federal government. We are holding this hearing to examine what has gone wrong at the K-Town Mall, a $200 million Defense Department construction project.

On September 28, 2006, this Committee held a hearing on the Baghdad Police College. This was a U.S. project to build new barracks and classrooms to educate and train Iraqi police forces. As we learned at that hearing, the project was in shambles. I have some pictures of that project, which I would like to show.

At the hearing, we heard testimony from the Special Inspector General for Iraq Reconstruction that construction was so deficient that toilets were draining through the reinforced concrete floors, literally raining on the cadets. Auditors told us about light fixtures so full of urine and feces that they would not operate.

The excuse from the Defense Department was that this was a war zone.

Today, we consider a different construction project. This project is not in a war zone. It’s not in Iraq or Afghanistan. This project is being built on a United States military base in Germany. U.S. project officials live and work every day next to the facility. It’s called the Kaiserslautern Military Community Center, also referred to as the K-Town Mall.

Yet it is also over budget, behind schedule, and falling apart.

The K-Town Mall is the Pentagon’s largest single–facility construction project in the world. It will have a hotel, sports bar, slot machines, and over 800,000 square feet of retail space. But just like the Baghdad Police College, the construction has been deficient, and U.S. oversight has been wholly inadequate. I have some pictures of this project, and the similarities are striking.

Here’s one showing how the roof is leaking continually and is causing damage to the finished construction underneath. This will cost millions of dollars to replace. Here are some additional photos of the faulty construction.

And here’s another picture showing how flammable sealant was used in kitchen exhaust ducts.

How could this have happened? How could construction of a modern-day facility in a Western country on a U.S. military base resemble the shoddy and makeshift practices of a war zone? That’s what we’re here to find out.

Certainly, there are problems with the contractor on this project, which is a German government-controlled entity called LLB. And we will hear about some of these deficiencies today.

But the bottom line is that this is a U.S. government project. We are spending over $200 million in U.S. funds to build the K-Town Mall. Yet the Air Force has failed in its responsibilities to conduct proper planning and oversight.

The project is millions of dollars over budget and has no validated cost estimate. The project was supposed to be done last year, but now there’s no working completion date.

I want to introduce for the record an audit issued by the Air Force Audit Agency just last week, on June 22. This report details literally dozens of oversight defects by the U.S. government at the K-Town Mall project. Let me just read a few. The Air Force:

• “did not provide adequate oversight of the planning procedures;”
• did not “establish a process for the contractors to provide contractor qualifications for U.S. review;”
• “did not establish procedures directing project managers to review and validate cost estimates;”
• “did not properly monitor and approve contractor payments;”
• paid for “materials in excess of approved contract quantities;” and
• “did not properly appoint certifying and accountable officials.”

This is a long report, over 100 pages. So I asked my staff to prepare a short fact sheet with the key auditor findings. That fact sheet is available to members, and I ask that it be included in the record.

GAO investigators also visited the K-Town Mall. We are fortunate that they can be here today to tell us what they learned. As we will hear, they saw irresponsible management, shoddy work, and millions of dollars in waste.

The federal government spent a record amount — over $400 billion — on federal contracts last year. Over 40 cents of every discretionary federal dollar now goes to a private company. But far too much of this spending is being squandered. A report I released yesterday identified 187 contracts — worth over $1 trillion — that have been plagued by waste, fraud, abuse, or mismanagement since 2000.

The same pattern happens over and over again: The contractors get rich, the work doesn’t get done, and the taxpayers get soaked.

As the main oversight committee in the House, we have an essential job to do. We need to examine what went wrong so we can hold officials accountable and enact reforms. That is what I hope we can begin to do today by holding this important hearing.