U.S. contractors’ failure to pay Afghans is causing grave problems, watchdog says

KABUL — U.S. and other foreign contractors owe Afghan workers and companies potentially tens of millions of dollars, heightening security risks for Westerners living and working in Afghanistan, according to a government report released Thursday.

The report by the Special Inspector General for Afghanistan Reconstruction (SIGAR) details how local subcontractors in Afghanistan are threatening to kidnap or kill Western businessmen and employers over alleged nonpayment for U.S.-financed work. One man threatened to set himself on fire in front of the U.S. Embassy over the issue.


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“There is a serious problem in Afghanistan related to disputes regarding the payment of Afghan subcontractors by prime contractors,” John F. Sopko, the inspector general, wrote in a letter accompanying the report, which was sent to numerous senior officials this week, including Secretary of State John F. Kerry and Defense Secretary Chuck Hagel. “SIGAR has received testimonial and documentary evidence from credible sources alleging death threats, work stoppages, and strikes.”

With tens of billions of U.S. tax dollars flowing into Afghanistan since the war began in 2001, government contracting has proved highly lucrative for thousands of U.S. and foreign companies. But many projects also rely heavily on subcontractors, about 90 percent of whom are based in Afghanistan.

In recent years, SIGAR and other government agencies have received a flood of complaints about prime contractors — about 40 percent of whom are U.S.-based — not living up to contractual agreements. According to the report, SIGAR’s hotline received 183 complaints about nonpayment from 2009 through October. Fifty-two investigations are underway into complaints involving a total $69 million.

“While a subcontractor may always face the risk of nonpayment,” the report says, “Afghan subcontractors may be particularly at risk due to a lack of adequate legal protections and limitations placed on the U.S. government’s ability to intervene on their behalf.”

Meanwhile, a growing number of Afghan subcontractors are threatening street justice.

SIGAR has documented threats to “blow up a compound of U.S. contractors and government agencies,” detonate suicide bombs, pull weapons on employers or damage property to try to collect money.

“Investigators have found that the prime contractor’s failure to pay is often viewed by the Afghan subcontractor as a failure on the part of the U.S. government,” the report says.

In February, a subcontractor told SIGAR representatives he planned to ignite himself in front of the U.S. Embassy, saying he had not been paid for work on an Army Corps of Engineers project in Helmand province. There is no evidence he followed through on his threat.

The report notes that failure to pay subcontractors also can lead to serious hardship for Afghan workers, many of whom earn only a few hundred dollars a month.

In addition, some Afghan employees have walked off the job amid allegations of nonpayment, threatening the pace of multimillion-dollar U.S.-financed reconstruction projects.

But the inspector general also notes that prime contractors have faced “extortion” following false claims of nonpayment made to Afghan police and courts.

In some cases, the prime contractors or their employees have had their passports seized by Afghan authorities or have been put on the no-fly list at Kabul’s airport so they cannot leave the country until a payment dispute is resolved. Afghan police have also issued arrest warrants for prime contractors accused by Afghan employees of nonpayment.

U.S. authorities are often powerless to intervene, even when it appears the allegation of nonpayment is unfounded.

“We have identified a range of potential risks associated with subcontractor nonpayment,” the report states.

David Snepp, a spokesman for the U.S. Embassy, said State Department officials would review the report.

Sopko recommends that U.S. agencies, including the Defense Department, more aggressively monitor payments to contractors and step in to suspend or revoke contractors’ licenses when payments are not made.

He also recommends more aggressive enforcement through the False Claims Act when it is proved that prime contractors have not made justifiable payments to subcontractors.

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