DHS spent $9.8 million to store unused steel for border fence

DHS Spent $9.8M to Store $44M of Steel It Bought But Did Not Use to Build Mexico Border Fence
By Edwin Mora
December 19, 2011

(CNSNews.com) - U.S. Customs and Border Protection (CBP), a division of the Department of Homeland Security, has spent about $9.8 million to store $44 million in steel that it bought but did not use to build fence along the U.S,-Mexico border, according to a report from the DHS Inspector General.

CPB has in storage about 27,000 tons of “extra steel” that could be used to extend the estimated 650 miles of fencing mandated by Congress along the approximately 2,000-mile long southwest border, according to the IG.

An IG report released in November notes that in January 2008, the CBP -- a DHS component -- awarded an unnamed “prime contractor” a “Supply and Supply Chain Management (SSCM) task order” for storing and purchasing steel to support the construction of fence along hundreds of miles of the U.S.-Mexico border by Dec. 31, 2008 as part of the Secure Border Initiative (SBI) that was mandated by Congress.

Although the report does not name the prime contractor who was awarded the SSCM task order, the CBP reported that it “teamed up with The Boeing Company” of Chicago, Ill. to “support and facilitate the successful execution” of all fence building operations under the SSCM project mentioned in the IG report.

The steel purchased under the task order was used to build about 299 miles of the estimated 651 miles of fence that have been erected so far along the U.S.-Mexico border as requested by Congress. Most of the fence is single-layered, including 352 miles of fence aimed at preventing people from crossing the border illegally, known as a primary pedestrian fence, and 299 miles of fence aimed at preventing vehicle crossings known as a vehicle fence.

After using about 117,000 tons of steel to build the 299 miles of fence from a total of 145,000 tons purchased under the task order, “27,557 tons of extra steel, with a value of about $44 million, remained in storage,” said the DHS IG report.

“CBP did not efficiently plan the purchase and storage of steel for the SSCM task order,” reported the DHS IG, later adding, “as a result, 27,557 tons of extra steel, with a value of about $44 million, remained in storage at the end of the task order. Further, CBP incurred $9.8 million in additional storage costs because it did not move the remaining steel to a government facility for more than 2 years after the original storage contract expired.”

According to the IG, “the original storage contract for the SSCM task order covered the period from April to December 2008” and “instead of moving the extra steel to a cost-efficient location, CBP extended the original contract and awarded a supplemental storage contract.”

CBP ended up spending $9,753,010 in storage fees between January 2009 and March 2011 after making revisions to the original contract.

The agency admitted to the DHS IG that the “extra steel” can be used to extend the fence along the southwest border.

“CBP also indicated that if required to build additional fence, it would use the extra steel for future construction projects,” stated the IG. While the steel to build more border fence is being stored, Congress has only required CBP to fence about 650 miles of the approximately 2,000-mile long U.S.-Mexico border “where fencing would be most practical and effective,” noted the IG.

The agency also told the DHS IG that the extra steel will be used “to maintain and repair the existing fence and that it has already used some of it for this purpose. In January 2011, CBP transported approximately 500 tons of steel to two areas along the southwest border to replace damaged fencing.” That brings down the total 27,557 tons of “extra steel” that remained in storage after the 299 miles of fence were built under the task order to about 27,000 tons.

During the course of the task order that resulted in 299 miles of fence built along the southwest border, the contractor “stored and distributed steel from three locations: El Paso, Texas; Houston, Texas; and Lynwood, California,” added the IG report. “CBP consolidated the remaining steel at the end of the project to the El Paso, Texas facility.”

According to the IG, overall, CBP spent $69 million more than it needed to manage the storage and purchase of steel in support of fence construction along the U.S.-Mexico border.

The agency “purchased steel based on an estimate before legally acquiring land or meeting international treaty obligations,” reads the IG report. “In addition, it did not provide effective contract oversight during the project: it paid invoices late, did not reconcile invoices to receiving documents, and did not perform a thorough review of the contractor’s selection of a higher-priced subcontractor or document the reasons for its approval of the subcontractor.”

“As a result, Customs and Border Protection purchased more steel than needed, incurred additional storage costs, paid interest on late payments, and approved a higher-priced subcontractor, resulting in additional expenditures of about $69 million that could have been put to better use,” said the IG report.

In responding to the DHS IG’s findings, CBP disputed the $69 million in overrun costs spent on storing and purchasing steel for the border fence saying the number is more like $282,000.

“While we agree that the program incurred unanticipated costs, we markedly disagree with the amount of these costs and the reasons why they were incurred,” said CBP in a response to the DHS IG audit that was included in the report. “In short, of the $69 million questioned in the report, we agree that approximately $282,000 in unanticipated costs were attributable to errors in using CBP's accounting system to properly process invoices and track steel as an asset. CBP immediately responded to these early challenges, correcting them within 60 calendar days, resulting in no late payments thereafter. The balance of the costs discussed in the draft report were not program overruns or funds spent unwisely as we briefly discussed here.”

CBP “wholly” disagreed with the IG conclusion that “$44 million in excess steel was purchased as a result of poor management practices,” according to the agency’s response included in the report.

“Since 2008, Customs and Border Protection has spent approximately $1.2 billion to construct physical barriers along the southwest border as part of the Department’s Secure Border Initiative,” noted the DHS IG. “About $310 million of the cost was to purchase and store steel in support of fence construction.”