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NATO says new contracting rules will help eliminate Afghan corruption

By David Nakamura
Washington Post Staff Writer
Monday, September 13, 2010; 8:04 PM

KABUL - Following new guidelines designed to stimulate local business development and combat corruption, NATO has contracted with three Afghan companies owned by women to provide boots and clothing to Afghan soldiers, officials said Monday.

The contracts could cost up to $300 million - significantly less than buying the items from U.S. or other foreign firms, officials said.

The five-year deal was signed shortly before Gen. David H. Petraeus, the top military commander in Afghanistan, issued new guidelines last week to govern billions of dollars of NATO contracts. Officials said Petraeus wants to ensure that contract dollars are spread beyond a select group of Afghan companies to help develop a broader sector of firms that can stimulate the local economy and compete on the international market.

The contracts with the women-owned companies, which will provide boots, T-shirts and other clothing to 125,000 soldiers, follow the new guidelines and are an example of future deals the NATO command would like to see, officials said.

Afghan President Hamid Karzai had lobbied for the change, arguing that much of the $14 billion issued last year in NATO contracts was funneled to favored companies run by corrupt executives who enriched themselves at the expense of the fight against the Taliban insurgency.

"With proper oversight, contracting can spur economic development and support the Afghan government and NATO's campaign objectives," Petraeus wrote in a two-page memorandum. "If, however, we spend large quantities of international contracting funds quickly and with insufficient oversight, it is likely that some of those funds will unintentionally fuel corruption, finance insurgent organizations, strengthen criminal patronage networks and undermine our efforts in Afghanistan."

The new rules stipulate that NATO should first seek Afghan contractors. If it is unable to find contractors that are qualified, NATO must require that international firms hire local staff to carry out the terms of the contract. Working with a broader range of Afghan companies, Petraeus wrote, "will help break monopolies and weaken patronage networks that breed resentment."

Brig. Gen. Steve Lyons, who oversees the contracting, said Monday that the new guidance "underscores General Petraeus's acknowledgment of President Karzai's concern and the serious nature of which he takes it."

So far this fiscal year, NATO has issued $2.7 billion in contracts, of which $1.7 billion (63 percent) has gone to Afghan-owned firms, Lt. Col. Tom Ficklin said.

Using local firms can significantly reduce costs and timetables because the products do not have to be shipped from American factories, Ficklin said. He said the $300 million in products that the women-owned Afghan companies are expected to provide over five years would cost an estimated $1.4 billion if made in the United States.

"Those are significant savings to taxpayers," Ficklin said. Officials are looking to find similar savings by using Afghan companies to provide construction materials, he added.

NATO distributes up to 50,000 contracts per year, said Adm. Kathleen Dussault, head of the Joint Contracting Command. Every contract worth more than $100,000 must now be formally vetted and entered into a database to ensure quality and help prevent fraud.

In some cases, Dussault said, prime contractors hire so many subcontractors, with money skimmed off at each step, that the resulting product, whether it is the building of a road or a school, is inferior.

"The Afghan people, their perception of fraud often times is, 'Why would you accept such poor quality? You are the United States of America. You are technological giants. Why do you accept this deficient outcome?' " Dussault said.

A NATO task force that is examining contracts for evidence of corruption is focusing on Kandahar, a dangerous province in the south that has been the focus of recent NATO efforts to root out Taliban insurgents, Dussault said. Twenty-two auditors are at work identifying who has received contracts and which groups of residents have been left out, she said.

One of the largest pools of NATO contracting money is paid to more than 52 private security companies that provide armed guards to escort military supply convoys along dangerous highways and protect embassies and dignitaries. Last month, Karzai ordered that such firms, which he considers a threat to the national government's sovereignty, be disbanded within four months.

Ficklin said the Ministry of the Interior has created a three-step process to phase out the firms. The government will first target illegally operated private security companies that are not registered properly with the government and those firms, legal or not, that provide security on the supply convoys.

Next, the government will phase out the licensed firms that have been criticized for acting too recklessly and indiscriminately shooting at or killing people.

Finally, officials will look at those companies that protect embassies, private businesses and non-government organizations and dignitaries.

Zamaray Bashiri, a spokesman for the Interior Ministry, said that a detailed plan has been put together and sent to Karzai for approval.

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