Fixing the Failed U.S. Reconstruction in Iraq

August 12, 2006

As violence in Baghdad spirals out of control, it is easy for Americans to overlook the fact that the people there live with an average of just eight hours of electricity a day, while water and sewage systems remain intermittent at best. After more than three and half years and $3 billion spent, water, electricity, and sewage services only recently crept above pre-war levels in some other parts of Iraq. At the same time, these and other services remain far below U.S. government expectations and the original contractual obligations of most U.S. companies.

In its July 31 report to Congress, the Special Inspector General for Iraq Reconstruction (SIGIR) – a congressionally mandated office tasked with oversight of all U.S. spending on Iraq reconstruction – found that only half of all planned electricity, water and sewage projects are complete, while nearly a third in the electricity sector alone have yet to begin. And, while nearly $15 billion has been paid out on all Iraq reconstruction contracts, 20% of health projects remain incomplete, as do nearly 50% of projects in the transportation and communication sectors.

However, the term “complete” can be misleading. SIGIR found that many projects given this label by other U.S. agencies were in fact poorly built, badly run, and mismanaged. For example, SIGIR’s on-site investigations at “completed” Iraqi border facilities revealed “significant problems with quality of work performed and the adequacy of maintenance for the facilities.” The electricity sector has been hampered by the failure of contractors to build transmission and distribution lines to connect new generators to homes and businesses.

SIGIR’s work began in October 2004, but it only recently started assessing individual projects and, even more recently, releasing the names of the project contractors. In depth assessments, however, have been few and far between. Out of 1,678 contracts awarded by the U.S. government, SIGIR has assessed just 56, or 3.3%.

These assessments have revealed regular mismanagement, waste and abuse – leading to a series of U.S. contract cancellations. For example, a $243 million contract held by the Parsons Corporation for the construction of 150 health care centers was cancelled after more than two years of work and $186 million yielded just six centers, only two of which are serving patients. Parsons was also dropped from two different contracts to build prisons, one in Mosul and the other in Nasiriyah. The Bechtel Corporation was dropped from a $50 million contract for the construction of a children’s hospital in Basra after it went $90 million over budget and a year and a half behind schedule. These contracts have since been turned over to Iraqi companies.

SIGIR has not completely abandoned its reticence to cite contractors by name. Its July report includes the cancellation of a “major contractor” for long-term operations and management in the electricity sector and a contract to rehabilitate eight hospitals across Iraq.

These contracts represent the tip of the iceberg. Parsons, the second largest recipient of reconstruction dollars after Halliburton, holds $5.3 billion in contracts, Bechtel has $2.4 billion, and eleven more U.S. companies, including Perini, Fluor, Shaw Group, and Washington Group International, have more than $1.5 billion each.

Given SIGIR’s findings thus far, detailed audits of every U.S. contractor and contract should now be performed. Companies that have failed must not only be dropped from their contracts, but they must also return all misspent funds. Billions more are needed for the United States to adhere to its obligations – both moral and, under the Geneva Conventions and UN Security Council Resolutions, legal – to ensure that Iraqis have access to life’s basic necessities.

But, as of September 30, some $2 billion earmarked for Iraq reconstruction that currently remains “unobligated” – money appropriated by Congress in the Iraq Relief and Reconstruction Funds that has not yet been assigned to specific projects – will revert back to the U.S. Treasury unless action is taken now.

We cannot afford to throw this good money after bad.

It is well past time to turn reconstruction over to Iraqi companies – the same companies that brought most basic services back on line just three months after the 1991 U.S. invasion of Iraq. With unemployment in Iraq estimated at 40%, these companies and their employees are more than eager to get to work. And, as has been demonstrated time and again, when Iraqi companies hold contracts themselves rather than act as subcontractors for U.S. companies, their pay, authority, and job security go up while, according to SIGIR, insurgent attacks against their projects go down.

Simply put, Iraqis holding clipboards and jackhammers are less likely to carry guns and IEDs.