Much Undone In Rebuilding Iraq, Audit Says

By Andy Mosher and Griff Witte
Washington Post Foreign Service
Wednesday, August 2, 2006

NASIRIYAH, Iraq, Aug. 1 -- A flailing Iraq reconstruction effort that has been dominated for more than three years by U.S. dollars and companies is being transferred to Iraqis, leaving them the challenge of completing a long list of projects left unfinished by the Americans.

While the handover is occurring gradually, it comes as U.S. money dwindles and American officials face a Sept. 30 deadline for choosing which projects to fund with the remaining $2 billion of the $21 billion rebuilding program. More than 500 planned projects have not been started, and the United States lacks a coherent plan for transferring authority to Iraqi control, a report released Tuesday concludes.

In some cases, Iraqis are having to take over projects from American construction firms that were removed from jobs because of poor performance. For example, in Nasiriyah, about 300 miles southeast of Baghdad, the Iraqi firm Al-Basheer Co. was recently given a prison-construction contract that a huge American conglomerate, Parsons Global Services Inc., lost. Parsons was six months overdue with the project and had completed only a third of the job.

"This is the fourth quarter" of the U.S.-led reconstruction, said Stuart W. Bowen Jr., special inspector general for Iraq reconstruction, whose office is issuing the report. "The Iraqis are going to have to develop their own system."

As the handoff proceeds, there are questions about exactly what it is the Iraqis will inherit and how a government plagued by corruption can restore confidence in a rebuilding program that has been dogged by corruption allegations from the start.

Bowen's report makes clear that while the rebuilding campaign has achieved some successes, hundreds of jobs remain incomplete and many key projects hang in limbo.

The United States has completed 82 percent of its planned projects, having spent $15 billion. Those funds have brought oil and electricity production above prewar levels. They have given 5 million more people access to sanitized water. And they have paid for more than 1,200 security facilities such as fire and police stations.

The reconstruction program, though, is also littered with notable failures. A project to create more than 140 primary health-care centers resulted in 20 so far. Baghdad residents still have about eight hours of electricity per day, less than they did before the war, even as power supplies improve in other parts of the country. And a crucial oil pipeline that could have brought the fledgling Iraqi government nearly $15 billion in badly needed revenue remains more than two years behind schedule.

With more than two-thirds of reconstruction funds spent and more than 90 percent already directed to specific projects, reconstruction officials are reckoning with the fact that they will not accomplish all they had hoped. Security costs are a major reason why, but Bowen's office has reported that mismanagement and poor planning also played a role.

Some projects will be left for the international community to fund or for the Iraqi government to finance with oil revenue. The United States will continue to spend money on reconstruction in Iraq through the U.S. Agency for International Development, but the flow of funds in future years is expected to be a fraction of what it has been.

To lawmakers, the U.S.-directed reconstruction has fallen well short of expectations.

"This story is a very disappointing one. Everywhere you look, goals have not been achieved," said Sen. Susan Collins (R-Maine), who will hold a hearing on the reconstruction today. "I don't think we can ever get back the billions of dollars that have been lost to poor planning, outright fraud and corruption."

Sen. Byron L. Dorgan (D-N.D.) blamed contractors for not delivering on promised work even as they continued to cash their checks.

"We paid for air conditioning and ended up with a ceiling fan," Dorgan said. "You had a big pot of money and you had a lot of hogs in the creek wallowing and shoving and grunting, trying to get some of it. It looks like they were a lot more effective at getting the money than they were at doing reconstruction."

The reconstruction was rife with problems from the beginning. In another report, scheduled to be released today, Bowen's office concludes that the United States had not issued any contracts for rebuilding the country by the spring of 2003, when the war began, except in a couple of limited areas.

"We weren't systematically prepared to do the kind of contracting necessary at the time of the invasion. That's the cold reality," Bowen said.

As a result, the initial phases of reconstruction were marked by massive confusion as short-staffed contracting offices labored under urgent deadlines to get the work started, Bowen said. Billions of dollars in contracts were given out with only limited competition, or none at all, and rules were devised on the fly.

"They were just operating under their own regulations that they wrote up. It was ad hoc. And that's why people described it as the Wild West," said Bowen, who is recommending the government take immediate action to prepare for the next contracting emergency.

Bowen said the government has since improved its contracting in Iraq, but the impact of those frenzied early days continues to be felt. Bowen's office has referred 25 cases of suspected criminal behavior to the Justice Department, and it has 82 more open investigations into alleged fraud, corruption, bribery, kickbacks or gratuities. A handful of reconstruction officials and contractors have already pleaded guilty to charges related to their misuse of reconstruction funds.

Some of the biggest U.S. companies have come under intense scrutiny, too, for their performance in Iraq. Halliburton Co. subsidiary Kellogg Brown & Root, Bechtel Corp. and Parsons have each received in excess of $1 billion worth of reconstruction work, but have been criticized for not finishing key jobs. Now, all three are wrapping up their reconstruction work and heading home.

"We're basically winding down. Our work is almost finished," Bechtel spokesman Drew Slaton said, adding that the company would be almost completely out of the country by the end of October.

Bechtel was recently removed from a hospital project in southern Iraq that was behind schedule and over budget.

To fill the void when U.S. contractors fail to finish, reconstruction officials are frequently turning to the Iraqi firms already working as subcontractors. Maj. Gen. William H. McCoy, who commands the Corps of Engineers in Iraq, said the Iraqis so far have performed as well -- in some cases, better -- as primary contractors than they did when they worked under U.S. companies.

At the prison project in Nasiriyah, a $49 million maximum-security complex, Al-Basheer took over for Parsons on July 12. The company now has 81 days to prove it can handle the job, under the terms it negotiated when it took over the work.

"It was more efficient and cheaper" to use the Iraqi firm, Bowen said. "And it has energized the economy because it puts Iraqis to work."

McCoy cautioned, however, that "while there is an enormous amount of Iraqi untapped talent, they still need some help."

"They went from a very progressive nation back in the '60s and '70s to an almost totally dependency-oriented culture that was totally focused on supporting that one man. . . . They did what Saddam wanted or they died," McCoy said. "So my sense is that they have lost some of that talent and it's going to take some time to rebuild that."

Witte reported from Washington.

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