Democrats called on the Bush administration yesterday to cancel contracts with private companies hired to oversee $1.7 billion in public works projects in Iraq, saying the companies have conflicts of interests and cannot be trusted to spend the government's money wisely.
Sen. Ron Wyden (Ore.), Rep. Henry A. Waxman (Calif.), Sen. Byron L. Dorgan (N.D.) and Rep. John D. Dingell (Mich.) said their research showed that some of the management companies hired by the Coalition Provisional Authority have a tangle of close financial ties to the construction and engineering firms they are supposed to monitor.
Among the companies cited were Parsons Corp. and CH2M Hill Inc., engineering and construction businesses that received a $28.5 million contract in March to manage four other contractors. The report said that Parsons is a partner of one of those other contractors, Fluor Corp., on "a $2.6 billion joint venture to develop oil fields in Kazakhstan."
CH2M Hill does business with Fluor and two other contractors on the project, Washington Group International Inc. and AMEC Inc., the report said. In one project, CH2M Hill and Washington Group International are "integrated partners" on a $314 million contract with the Energy Department.
Those and other details were included in a brief report called "Contractors Overseeing Contractors: Conflicts of Interest Undermine Accountability In Iraq." In a letter to Defense Secretary Donald H. Rumsfeld, they said the administration has "abdicated its responsibility to ensure that U.S. taxpayers' dollars are spent wisely."
The Democrats said they would introduce amendments to the defense authorization bill to end the contracts and require the Pentagon to provide the management oversight.
"These contractors are being asked to carry out essential government oversight functions, including defining and prioritizing project requirements and actually overseeing the work of construction contractors," the Democrats said in their letter. "It is not appropriate for contractors to exercise these functions -- particularly in view of significant conflicts of interests among these companies."
In a written statement, Parsons said the relationships would have no bearing on the ability of the company to manage the project and that it operates under the supervision of U.S. government personnel.
CH2M Hill did not return phone calls. Jerry Holloway, a spokesman for Fluor, described Iraq as a "fishbowl" and said all the companies there are under great scrutiny. He said the business relationship between Fluor and Parsons has no bearing on their activities in Iraq. "Our contract is with the Defense Department to support the CPA," he said. "That's who we're accountable to."
Defense Department spokesman Glenn Flood said the management contracts are in keeping with a long trend toward use of private companies to provide a wide variety of services. Though he would not speak directly about activity in Iraq, he said the Defense Department has no problem with the oversight of contractors. "The military should focus on its core mission, which is fighting wars and winning battles," Flood said.
Wyden said the companies in Iraq have no incentive to "take out a sharp pencil' and protect taxpayers. "You have a situation," he said, "where there is a cozy nest of interlocking financial interests."