Searching for Contracts of Mass Construction
Information on how public money is being spent to reconstruct Iraq is as elusive as America’s search for weapons of mass destruction
From the Winter 2004 issue of The News Media & The Law, page 28.
By Grant Penrod
The U.S. government has committed billions of taxpayer dollars to rebuild Iraq’s war-torn infrastructure, with little commitment to show the American public how those dollars will be spent.
What kinds of projects will be undertaken? Who will or has been hired and why? What kinds of profits will those companies reap? Who is overseeing the allocation of billions of dollars of public money?
The expenditure of such vast amounts of taxpayer dollars demands the highest levels of public oversight and transparency — often because secrecy leads to abuse, fraud and theft. But much like the search for weapons of mass destruction in Iraq, little has been uncovered in the quest for public accountability of America’s reconstruction contracting process.
“I’ve worked in national security my whole career and this is the most difficult time I’ve had getting information,” said David Wood, national security reporter for Newhouse News Service. “All of the reporting is: ‘I can’t tell what’s going on.’ ”
In November 2002, months before the start of the war, Bush administration officials secretly began preparing to award contracts to private companies to complete the anticipated reconstruction projects. Normally, the government contracting process requires the government to publicly request proposals and bids from interested companies. The proposals are scored and ranked, and a contract is awarded based on the highest-ranked proposal.
In this case, the U.S. Agency for International Development, the State Department agency responsible for awarding many of the reconstruction contracts, and the Army Corps of Engineers decided that the normal contracting process would not work. They needed to deploy reconstruction efforts quicker than the normal process would allow, and to maintain secrecy about the Bush administration’s plans to go to war.
USAID selected seven companies with security clearances and previous experience working with the government — about half the number that would normally bid — and allowed them to bid on the initial reconstruction contracts. Many of these initial contracts — worth more than $2 billion — were awarded to a sole bidder with no competition at all. Although the contracts were signed in early March 2003, the information was not disclosed until later in the month, a few days after the invasion.
Not long after the contracts were announced, questions and criticisms began to arise over the lack of transparency and accountability. Details of the contracts — including exactly what work was being performed, which subcontractors were performing the work, and how much they were charging — were not publicly available.
J. Brian Atwood, former director of USAID, questions such a need for secrecy.
“I don’t think the taxpayers are well served when there is not a competitive bidding process for the work,” Atwood told Newhouse News Service for a March 28, 2003, article on the reconstruction contracts.
Many of the contracts were awarded on a “cost-plus” basis, whereby the contracted company is reimbursed by the government for whatever it spends. The company is then paid a percentage of those expenditures in profit. Such contracts make it difficult to determine how much profit a company is making from a contract, and encourages companies to run up large bills to increase profits.
The criticism was fueled by allegations of impropriety in the process. A number of major news outlets reported that the companies selected for the no-bid and limited-bid contracts were prominent campaign contributors to the Bush administration, including Bechtel and Halliburton, the company led by Vice President Dick Cheney before he ran for office in 2000.
Allegations that a Halliburton subsidiary, Kellogg, Brown & Root, had overcharged for fuel imported into Iraq from Kuwait under one of the no-bid contracts strengthened the calls for a more transparent process. It was eventually discovered that the overcharge, possibly as much as $61 million, was due to the high prices charged by a Kuwaiti subcontractor. However, both the Army Corps of Engineers and Halliburton refused to name that subcontractor, according to press reports.
The name of the company, Altanmia Commercial Marketing Co., was only revealed when Rep. Henry Waxman’s (D-Calif.) office received a tip from an oil industry expert familiar with the region. Waxman confirmed the tip with the Army Corps and revealed the name to the press. On Jan. 14, Pentagon auditors requested a full investigation into the overcharge.
“Whether or not these allegations are true, the best way to address them is disclosure,” said Steven Aftergood, director of the Federation of American Scientists Project on Government Secrecy. “But that disclosure has been like pulling teeth.
“It’s just impossible to have any confidence that the money is being wisely spent if it is impossible to track it,” he added.
Such criticisms have led members of Congress to try to make the contracting process more open to public scrutiny. On April 10, Sens. Ron Wyden (D- Ore.), Susan Collins (R- Maine), Hillary Clinton (D-N.Y.), Robert Byrd (D-W.Va.) and Joseph Lieberman (D-Conn.) introduced the Sunshine in Iraq Reconstruction Contracting Act. On Oct. 8, Reps. Carolyn Maloney (D-N.Y.) and Waxman introduced the Clean Contracting in Iraq Act in the House.
Both bills require more information concerning government contracts to be made publicly available, and provide for congressional oversight of the performance of the contracts. Both bills have also languished in committee since being introduced.
Not all such attempts have been unsuccessful, though. As part of last year’s $87 billion Iraqi spending bill, a new Program Management Office was created.
The Program Management Office, briefly called the Iraq Infrastructure Reconstruction Office, was created to oversee the $18.6 billion allocated in the spending bill for civilian reconstruction. USAID and the Army Corps of Engineers, which previously oversaw the contracts, still award them, but under the new office’s oversight.
The office is part of the Coalition Provisional Authority, the Department of Defense agency responsible for governing Iraq, and will be located in Rosslyn, Va., and Baghdad.
“We’re committed to an open, transparent and fair contract award process,” Reuben Jeffrey III, coordinator of the authority’s reconstruction efforts, said at a meeting of government contractors Nov. 19. “The American people must be assured that we will be responsible stewards of their tax dollars. We will engage in rigorous and effective oversight to ensure that these funds are well invested.”
Retired Navy Rear Adm. David Nash, director of the new Program Management Office, echoed Jeffrey’s commitment to openness, adding that the office would make all information available on its Web site “in real time, all the time.”
“Essentially, our books will be open to the world,” Nash said. “We’re going to issue monthly reports, not only to Congress, but to others.”
Those promises of transparency have not materialized.
The PMO’s Web site, www.rebuilding-iraq.net, contained little information until early January. Most pages said only, “Content for this page is currently in development.” Recently, the site has added requests for contract proposals, but much information — including the “Strategic Plan” and “Organization” — remained “in development” in early February.
Not all of the $18.6 billion is still being overseen by the Program Management Office, either. The Bush administration decided in December to postpone much of the reconstruction work until after the U.S. transfers political control to the new Iraqi government, which is scheduled to occur in June. Work done after the transfer of power will not be subject to PMO oversight, but instead will be handled by the U.S. Embassy in Iraq.
In addition, billions of dollars in contracts not funded under the $18.6 billion appropriations bill remain beyond PMO oversight. This includes more than $4 billion from Iraqi oil revenue and U.S.-seized Iraqi assets.
Reps. John Dingell (D-Mich.) and Waxman have made it clear to Nash that such a system is unacceptable.
“The administration is not being candid about its plans in its public statements,” they wrote on Dec. 18. “While senior officials state that the new contracts will be awarded after full and open competition, the details of the solicitation directly contradict these assertions.”
The infrastructure reconstruction contract awarded to Bechtel on Jan. 6, at a value of $1.8 billion, provides just such an illustration. While USAID said the contract was awarded under “full and open competition,” it refused to divulge which other companies bid on the project, or why Bechtel was selected. The USAID official who announced to the press the awarding of the contract even refused to be identified.
When asked by a reporter why the official was speaking on condition of anonymity, Lawrence Di Rita, acting assistant secretary of defense for public affairs, answered, “Because that’s what we’re going to do.”
Pressed further, Di Rita eventually said that if there was something reporters wanted to attribute to a named official, he would review it. But even that concession illustrates that secrecy is a default, not something relied upon only when there is a compelling reason.
Scott Amey, senior investigator for the Project on Government Oversight, a Washington, D.C.-based public interest group, said no one — from reporters to government watchdogs to staffers on Capitol Hill — seems to fully know how the reconstruction contracting system works. “I don’t know how to dig deeper and see what is going on, and everyone is in the same position,” Amey said.
Upon returning from a tour of Iraq in December, Reps. Frank Wolf (R-Va.) and Christopher Shays (R-Conn.) urged President Bush to authorize an independent audit of the U.S. operations there, citing problems in Iraq’s post-war recovery process.
Rep. Waxman said such oversight should be a given.
“There is still far too much that the public does not know about the contracts to rebuild Iraq,” Waxman said. “Despite growing evidence of overcharging and fraud, the administration has continued to resist oversight by the press, congressional investigators, and even its own auditors.
“The administration isn’t just resisting oversight,” he added, “it is now undermining oversight.” u
Victor Gaberman contributed to this article