U.S. Pays Millions In Cost Overruns For Security in Iraq

An employee of Aegis Defence Services, a British private security firm, guards Iraq's Electricity Ministry in June. The cost of such services has mushroomed since 2003.
An employee of Aegis Defence Services, a British private security firm, guards Iraq's Electricity Ministry in June. The cost of such services has mushroomed since 2003. (By Steve Fainaru -- The Washington Post)
By Steve Fainaru
Washington Post Foreign Service
Sunday, August 12, 2007

BAGHDAD -- The U.S. military has paid $548 million over the past three years to two British security firms that protect the U.S. Army Corps of Engineers on reconstruction projects, more than $200 million over the original budget, according to previously undisclosed data that show how the cost of private security in Iraq has mushroomed.

The two companies, Aegis Defence Services and Erinys Iraq, signed their original Defense Department contracts in May 2004. By July of this year, the contracts supported a private force that had grown to about 2,000 employees serving the Corps of Engineers. The force is about the size of three military battalions.

U.S. officials and company representatives attributed the overruns to the cost of protecting a largely civilian workforce amid an escalating insurgency, as Corps of Engineers commanders demanded more manpower and increasingly expensive armor to guard their field staff.

"To pay a man or a woman to come over here, put the vest on every day and escort military and civilians around the theater, knowing that people want to blow them up and kill them, you gotta pay to get that level of dedication," said Col. Douglas P. Gorgoni, senior finance officer for the Corps of Engineers in Iraq.

Months ago, the military recognized that the two overlapping contracts were costing millions of dollars in duplicate spending and sought to consolidate them. The result is still the single largest security contract in Iraq. The new contract will save $7 million a month, according to the Corps of Engineers, but will still be worth up to $475 million to the winning bidder.

The Army eliminated Erinys from the competition, but the company has held up the award by filing three separate protests against what it described as a "fundamentally flawed" procurement process. The protests have forced the military to extend Erinys's contract. The company has received $169.4 million since the beginning of that contract, $120 million more than originally budgeted.

"Quite frankly, they are very extensive, very lucrative contracts. Why would they not try to protest them?" Gorgoni said, adding that he could not comment on the merits of the protests. Aegis is a finalist for the new contract, according to sources familiar with the bidding process.

The private security industry has surged in Iraq because of troop shortages and growing violence. After the March 2003 invasion, hundreds of foreign and Iraqi companies, many of them new, signed contracts with the U.S. and British militaries, the State Department, the Iraqi government, media and humanitarian organizations and other private companies.

The size of this force and its cost have never been documented. The Pentagon has said that about 20,000 security contractors operate in Iraq, although some estimates are considerably higher. Private security contractors have been used in previous wars, but not on this scale, according to military experts. Several lawmakers have recently sought to regulate the private security industry and account for billions of dollars spent on outsourcing military and intelligence tasks that once were handled exclusively by the government.

Rep. Marcy Kaptur (D-Ohio), a member of the House Appropriations defense subcommittee who was briefed by Aegis and the Corps of Engineers during a February visit to Iraq, said lawmakers are only now realizing the scope of private security there. "We're in the wake of this speedboat. We can't even catch up to the contracts," said Kaptur, who opposes the use of private forces and initiated an audit of Aegis by the Special Inspector General for Iraq Reconstruction, the second the agency has conducted.

The payments to Aegis and Erinys "are immense and probably shocking to a lot of people, but they represent just two companies within one sector," said Peter W. Singer, a Brookings Institution senior fellow who wrote a book on private security and has advocated greater oversight of the industry. "We're talking tip-of-the-iceberg stuff here. That's pretty disturbing when you begin to extrapolate it out."

Company representatives said the contracts were expanded to confront the escalating insurgent threat. "We're fulfilling the need as directed by the client," said Kristi M. Clemens, Aegis's Washington-based executive vice president. She said costs rose in line with the Corps of Engineers' security demands, including a request for additional armored vehicles that cost roughly $150,000 and are manned by guards who earn $15,000 a month. "It's expensive to operate in a high-risk area," Clemens said.

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