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Iraq: Rebuilding Plan Reviewed

by Jackie Spinner and Mary Pat FlahertyWashington Post
March 31st, 2004

In a report to Congress, Stuart W. Bowen Jr., a former White House lawyer who was appointed in January, said he is working with other audit agencies in reviewing the first $10 billion spent on some 1,500 contracts and has set up an IG council to coordinate oversight activities of the Coalition Provisional Authority.

In particular, Bowen said, he will "focus on the impact of rapidly escalating security costs" on the overall program, as well as the cost of insurance for contractors.

The report cited continuing security concerns as a threat to the reconstruction effort, saying those costs now consume an estimated 10 to 15 percent of contracts and "may be potentially higher." Because security is "a significant cost driver," it added, it raises "questions about the need for more funding -- Iraqi, donor or U.S. -- to accomplish the reconstruction mission."

The report's review of the spending of Iraqi money and U.S. funds found that though only about 4 percent of the contracts in fiscal 2003 were awarded without any competition, the sole source contracts were worth more than $3.2 billion, nearly one-third of the total. The report identified "limited competition and reliance on sole source procurements" as "issues of concern" that Bowen's staff of 58 would be pursuing.

The Iraqi money, from cash seized from Saddam Hussein's allies and the country's oil revenue, has had little oversight until now. That, in part, is because the interim authority is not a federal agency and therefore not subject to the same controls as the Defense Department and U.S. Agency for International Development, which are awarding taxpayer-funded contracts.

The Bowen report noted, for example, that the Defense Contract Audit Agency has issued more than 187 audit reports related to nearly $7 billion in reconstruction work. These audits found $132.6 million in questionable costs and $307 million in unsupported costs and has led to $176.5 million in suspended billings.

The Pentagon has identified five companies whose contracting costs are under review: a Halliburton Co. subsidiary, Titan Corp., Fluor Federal Services Inc., Perini Corp. and Washington Group International Inc.

The new inspector general of the U.S.-led interim authority in Iraq reported yesterday that though he is just beginning his own audits of reconstruction spending, he is concerned about the oversight of spending and control of cash.

The Bowen report said that the Defense Criminal Investigative Service has opened four bribery and corruption cases, four theft cases, two false claims cases, three weapons recovery cases, four counterfeit cases and one conflict of interest case.

In one of the alleged corruption cases, an Iraqi who tried to bribe officials within the authority was arrested and turned over to the Iraqi police. And the Iraqi director of a convention center allegedly solicited bribes from contractors seeking work at the convention center, including a subcontractor responsible for information technology work at the authority, according to the report. The subject was arrested and is in the custody of the Iraqi National Police.

The inspector general has asked the authority, USAID, Army Corps of Engineers, State Department and U.S. Army to ask all contractors with contracts greater than $5 million to turn over their internal compliance systems, codes of ethics and codes of conduct to Bowen's office by April 15.

"By virtue of the time constraints," the report notes, it does not contain any of its own audit, inspection or investigative work. Thus, Bowen wrote, "I recognize that the real work of my organization has only just begun."

Rep. Thomas M. Davis III (R-Va.), the chairman of the House Government Reform Committee, which has looked at Iraq contracting, said yesterday: "I'm particularly pleased to see the positive trend in the awards made using full and open competition. As the situation in Iraq becomes more stable and the acquisition infrastructure over there becomes more mature, that's exactly what I would hope and expect to see. The flexibilities built into the system appear to be working."





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