Final report on Iraq reconstruction says fraud, waste cost U.S. $1.5 billion

McClatchy Washington BureauJuly 9, 2013 


The shell of a prison that will never be used rises from the desert on the edge of this dusty town north of Baghdad, a hulking monument to the wasted promise of America's massive, $53-billion reconstruction effort in Iraq. Construction began in May 2004 at a time when U.S. money was pouring into the country. (Carolyn Cole/Los Angeles Times/MCT)

CAROLYN COLE — Los Angeles Times/MCT

— The $40 million shell of an unfinished prison in Iraq’s Diyala province; $2 million in laundered cash pocketed by government officials and contractors in Hilla; an $80 invoice on a $1.41 piece of PVC piping from a defense subcontractor near Baghdad.

Those are just three examples of fraudulent and wasteful spending that plagued U.S. reconstruction efforts in Iraq, according to the Special Inspector General for Iraq Reconstruction, which on Tuesday issued its final report on the U.S. government’s $60 billion reconstruction program for that country.

The report identified at least $1.5 billion in wasted or questionable spending during the period from 2004 to 2013. It urged Congress to create a new agency, the Office for Contingency Operations, which would oversee and coordinate such reconstruction in the future, prospectively avoiding some of the worst excesses.

“If it had existed at the outset of the Iraq program, the United States might have avoided wasting billions of taxpayer dollars,” said the report, titled “Learning from Iraq.”

Such an office would be critical to better spending and contracting practices if, for example, the United States were to get involved in reconstruction in Syria, where the country’s civil war has devastated entire cities.

“Experience has shown that we need a corps of dedicated civilian professionals in order to conduct these stabilization operations well,” said John Herbst, the director of the Center for Complex Operations at the National Defense University in Washington, who testified before the House Foreign Affairs Committee. “We have created the world’s greatest military, but without a civilian counterpart, this military will not conduct stabilization operations effectively.”

Inspector General Stuart Bowen also used the example of potential reconstruction in Syria to explain how such an agency would prove more effective than addressing each effort as it arises.

“It’s impossible to project the cost, but we do know the devastation in Syria is massive. And thus the stabilization and rebuilding of the country will take time,” Bowen said. Were the Office of Contingency Operations in existence, he added, it already would be “identifying the contractors, the personnel, the IT system, the oversight, how money would be managed, the controls . . . to ensure that we avert fraud, waste and abuse of the kind that we saw in Iraq.”

With an administrator appointed by the president, such an office also would bring accountability to a process that in Iraq was handled largely by military officers or government civilians who rotated in and out of their posts before any of the projects were completed.

He cited the example of the Federal Emergency Management Agency’s mishandling of Hurricane Katrina to make his point.

“There was no one in charge for Iraq specifically,” he said. “Mike Brown was there to fire when FEMA failed.”

The office would require roughly $25 million a year in funding, a small price, Herbst said, compared to the estimated $200 million a year it would have saved in Iraq spending.

The 172-page final report outlines nine years of questionable spending and misguided practices in the Iraq reconstruction effort. It blamed lack of planning and coordination and shaky oversight for widespread fraud and waste.

The report listed a plethora of failings: Many projects weren’t designed correctly, money designated for a specific use often was redirected to another project, Defense and State department efforts weren’t coordinated and no one was in charge overall. Contracts that shouldn’t have been approved slipped through the cracks, and under-the-table deals were struck.

U.S. reconstruction efforts, Herbst said, lacked legitimacy and the support of the Iraqi people. The failure of U.S. troops to establish security before reconstruction efforts began led many projects to fail.

“You must have sufficient security before engaging in reconstruction activity,” said Herbst. “That cost us billions of dollars and too many lives.”

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