A penny saved isn't always a penny earned

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July 26, 2010
Evan Duncan, Army Corps of Engineers public affairs

WIESBADEN, Germany — A penny saved isn't always a penny earned, at least not after the penny has passed its deadline to be spent.

Those are the rules according to congressionally-funded projects administered by the U.S. Army Corps of Engineers.

The money obligated to those projects comes with a termination date, usually five years and because of the large wave of U.S. installation consolidation projects in Europe starting in 2005, the corps' Europe District is expecting a follow-on wave of fund termination dates.

This will keep contract pros like Heidi Meissner extremely busy.

"For me it doesn't make a difference if I deobligate $1 million or 50 cents on a project. Each individual project requires the same amount of man-hours," said Meissner, the district's NATO-Host Nation Support section chief. "Next year, we have a much larger workload when you look at the number of contracts, not just the dollars."

Fiscal year 2011 contains more expiring contracts than ever before, said Meissner.

And yet, because of preparations Meissner and her team have made, the district is on track to close out the majority of these sometimes difficult accounts while working with German state construction agencies to investigate unliquidated obligations or ULOs to determine what's left, why and what should be done about them.

When a project is awarded, an amount of money is slated, or obligated, to pay for all the stages of construction and design. These funds, ULOs, have an expiration date and must be either paid to the contractor or deobligated back to the government before they expire.

Every year, corps employees must make sure the bottom line on these concluding projects equals zero.

"Closing projects out is difficult," said Kris Hurst, the district's Project Management Branch chief. "When you get down to the end of the project, you're holding some retainage for little things like as-built drawings, manuals, etc. There may be projects that have $10,000 left for things like that. When the contractor feels it would cost him more to do these things than the leftover amount, some of these projects go on and on with all these little monies left over on them."

The corps-wide goal is to have projects closed by June 30. A year prior to the contract end, 50 percent of the funds should be closed out and everything must be zeroed out by the end of the fiscal year, Sept. 30 of the terminating year. This means not only are 2010 projects being worked on this summer, but so are the large number of 2011 contracts.

"We have to think in advance," said Meissner. "We try to get in and see if additional money is needed, but it the money must be obligated and dispersed by June 30."

Any money still required for projects after the contracts run out must come from the current year's budget.

"The Army will have to come up with current-year money," said Lalit Wadhwa, the district's Programs Branch chief. "The Army doesn't have much current-year money"

While ULOs are an obstacle every USACE district faces, the Europe District faces some unique challenges.

According to Hurst, host nation agreements on design and construction boost the total of remaining funds on projects. Instead of $10,000 left on a project, for instance, the number may soar into the hundreds of thousands. Such a large total requires even more cooperation and earlier preparation to close.

Both the district's NATO-Host Nation Support section and the Project Management section have to work closely in the close-out process.

Meissner and Tony Pereira, a district contract specialist, are part of the host nation support side that helps settle these accounts.

"We make sure the money doesn't expire," Pereira said.

Additionally, while other sections face a high turnover rate, the district relies on these local nationals to provide stability and consistency to the ULO process.

One way the district dealt with this problem was by hiring a new project manager, Birgit Becker, to work specifically on ULOs.

"This way, project managers who are executing current projects don't have to do forensic work on a project that's five years old that they've had no past dealings with," Hurst said. "It frees them up to work on active projects."

Becker has only been on board for a few months, but she is already helping to relieve the workload.

Even with the new hire, Hurst stressed that the most important part of dealing with such a large amount of projects is through communication and relationship building with everyone involved in the projects - from construction workers to contractors, resource managers, project managers, financial analysts and of course, German partners.

"It has to be a team effort," Hurst said, "because you just can't do it all by yourself."

Hurst believes the district has made strides toward better handling of ULO funds, but as of now, it's just too early to see all of the successes.

"We are working hard this year to continue to develop these relationships," Hurst said. "Do we see a lot of the fruits yet? Not a lot, but some. In the following years we will see more and more of the fruits of our labor."