Panel cites billions in wasteful spending on war contractors

Report points to deficiencies in oversight

'We're real proud of being able to go into a war theater ... and support 200,000 troops,'William Utt, president and CEO of KBR Inc. 'We're real proud of being able to go into a war theater ... and support 200,000 troops,'William Utt, president and CEO of KBR Inc.
By Richard Lardner
Associated Press / June 8, 2009
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WASHINGTON - This is one Christmas gift US taxpayers don't need.

Construction of a $30 million dining facility at a US base in Iraq is scheduled to be completed Dec. 25. But the decision to build it was based on bad planning and botched paperwork. The project is too far along to stop, making the mess hall a future monument to the waste and inefficiency plaguing the war effort, according to an independent panel investigating contracting in Iraq and Afghanistan.

In its first report to Congress, the Wartime Contracting Commission presents a bleak assessment of how tens of billions of dollars have been spent since 2001. The 111-page report, obtained by the Associated Press, documents poor management, weak oversight, and a failure to learn from past mistakes as recurring themes.

The report is scheduled to be made public Wednesday at a hearing held by the House Oversight and Government Reform's national security subcommittee.

US reliance on contractors has grown to "unprecedented proportions," according to the bipartisan commission, established by Congress last year. More than 240,000 private sector employees are supporting operations in Iraq and Afghanistan. Thousands more work for the State Department and Agency for International Development.

But the government has no central database of contractors, what services they provide, and how much they're paid. The Pentagon has failed to provide enough trained staff to watch over them, creating conditions for waste and corruption, according to the commission.

In Iraq, as US troops depart in larger numbers, there will be too few government eyes on the contractors left to oversee the closing of hundreds of bases and disposal of mountains of federal property, according to the panel.

At Rustamiyah, a 7-acre base turned over to the Iraqis in March, the military population plunged from 1,490 to 62 in three months. During the same period, the contractor population fell from 928 to 338, leaving more than five contractors for every service member.

In Afghanistan, where President Obama has ordered a large increase of US troops, existing bases will have to expand and new ones will be built - without proper oversight unless the Pentagon rapidly changes course.

One commander in Afghanistan told the commission he had no idea how many contractors were on and off his base each day. Another officer said he had property all over his installation but didn't know who owned it or what kind of shape it was in.

There are questionable construction projects in Afghanistan, too. The commission visited the New Kabul Compound, a building intended to serve as headquarters for US forces in Afghanistan. But members saw cracks in the structure, broken and leaking pipes, sinking sidewalks, and other defects.

There are concerns about a massive support contract known as "LOGCAP" that provides troops with essential services, including housing, meals, mail delivery, and laundry.

Despite the huge size and importance of the contract, the main program office managing the work for both Afghanistan and Iraq has only 13 government employees. For administrative help, it must rely on a contractor.

KBR Inc., the primary LOGCAP contractor in Iraq, has been paid nearly $32 billion since 2001. The commission found billions of dollars of that amount was wasted due to poorly defined work orders, lack of oversight, and contractor inefficiencies.

In one example, defense auditors challenged KBR after it billed the government for $100 million in costs for private security even though the contract prohibited the use of for-hire guards.

KBR has defended its performance and criticized the commission for making biased statements against the company.

"As we look back on what we've done, we're real proud of being able to go into a war theater like that as a private contractor and support 200,000 troops," William P. Utt, chairman of Houston-based KBR, said last month.

KBR is also linked to the dining hall construction snafu, although the commission faults the military's planning and not the contractor. With American forces set to be out of Iraq by the end of 2011, the US will use the new facility for two years at most.

In July 2008, the Army said a new dining facility was badly needed at the Camp Delta forward operating base because the existing one was too small, had a saggy ceiling, poor lighting, and an unsanitary wooden floor.

KBR was awarded a contract in September. Work began in late October.

But in an April visit to Camp Delta, the commission learned that the existing mess hall had just been renovated. The $3.36 million job was done by KBR and completed last June. Commission staff toured the renovated hall "without seeing or hearing of any problems or shortfalls," according to the report.

The decision to push ahead with the new hall was based on paperwork that was never updated and a failure to review the need for the project after the security agreement was signed. Canceling the project would save little money because KBR would have a claim for payment based on the investment already made.