Contractors Rarely Held Responsible for Misdeeds in Iraq

A similar case against the private military firm Blackwater USA has been allowed to proceed in North Carolina. But Blackwater has fought the case to the Supreme Court, enlisting high-caliber legal talent along the way -- including former Pentagon inspector general Joseph E. Schmitz and Whitewater prosecutor Kenneth W. Starr.

One contractor that had its day in court was Custer Battles LLC. Whistle-blowers claimed the firm used an elaborate string of shell companies to drive up profits, and last year a jury returned a $10 million verdict against the firm. But in August, a federal judge in Virginia overturned the ruling, saying the court did not have jurisdiction.

Critics think that many cases are never raised because of spotty oversight. The Pentagon has spent about $250 billion in Iraq, yet the Defense Department's inspector general's office has only two investigators and a half-dozen auditors working there. As recently as last year, it had none.

"There's never been a time in our country's history when we've shoved so much money out the door with so little oversight," said Sen. Byron L. Dorgan (D-N.D.), who blames Republican indifference for the lack of accountability.

The special inspector general for Iraq reconstruction, Stuart W. Bowen Jr., has nearly 60 auditors and investigators based in Baghdad and has won bipartisan praise for his work. But the office, which was set up to be temporary, has an October 1, 2007, deadline for completing its mission. A group of Democratic and Republican senators have said they think the office should remain open beyond then, and they say they intend to push legislation after Tuesday's elections that would make that happen.

Bowen, a Republican, has overseen investigations resulting in the convictions of several people in connection with a bribery scheme. His office estimates that its audits have saved the government more than $400 million.

For example, auditors reviewed 14 projects by one contractor, Parsons Corp., and found that 13 had serious defects. Among the problem contracts was one to build 142 health clinics. Only six have opened.

Yet Parsons will not have to return any of its profit, nor is it likely to face any kind of formal punishment. Its contracts were what are called "cost-plus" deals, widespread in Iraq, in which the government bears much of the risk.

Bowen said the government should have been willing to fire contractors when it realized that projects were going awry. "I started pushing for terminations for default, which is how you hold underperforming contractors responsible, in the summer of 2005," Bowen said.

But his calls were rarely heeded. The reason? "Litigation fear," he said. "It was viewed as too much trouble."

Frederick F. Shaheen, an attorney with the firm Greenberg Traurig LLP who represents contractors, said firing a contractor is difficult because the military is so dependent on them.

If an official were to try to cancel a meal-service contract, for example, "some colonel is going to be on the phone to you ripping your lips off saying, 'Why aren't my troops being fed?' " Shaheen said.

The threat of canceling a contract "is normally the sharpest quiver in the bag of the contracting officer. But there's no arrowhead on it any more," Shaheen said. "So the checks and balances are gone. The system is broken."