Series of Woes Mar Iraq Project Hailed as Model
By James Glanz
The New York Times
Friday 28 July 2006
Baghdad, Iraq - The United States is dropping Bechtel, the
American
construction giant, from a project to build a high-tech children's
hospital in the
southern Iraqi city of Basra after the project fell nearly a year
behind
schedule and exceeded its expected cost by as much as 150 percent.
Called the Basra Children's Hospital, the project has been
consistently
championed by the first lady, Laura Bush, and Secretary of State
Condoleezza
Rice, and was designed to house sophisticated equipment for
treating childhood
cancer.
Now it becomes the latest in a series of American taxpayer-
financed
projects in Iraq to face overruns, delays and cancellations.
Earlier this year, the
Army Corps of Engineers canceled more than $300 million in
contracts held by
Parsons, another American contractor, to build and refurbish
hospitals and
clinics across Iraq.
American and Iraqi government officials described the move to drop
Bechtel in interviews on Thursday, and Ammar al-Saffar, a deputy
health minister in
Baghdad, allowed a reporter to take notes on briefing papers on the
subject he
said he had recently been given by the State Department.
The United States will "disengage Bechtel and transfer program and
project management" to the Army Corps of Engineers, the papers say.
Bechtel, the
State Department agency in charge of the work and the Health
Department in Basra
all confirmed that the company would be leaving the project, but
the reasons
are a matter of deep disagreement.
The Iraqis assert that management blunders by the company have
caused the
project to teeter on the verge of collapse; the American government
says
Bechtel did the best it could as it faced everything from worsening
security to
difficult soil conditions.
A senior company official said Thursday that for its part Bechtel
recommended that the work be mothballed and in essence volunteered
to leave the
project because the security problems had become intolerable. He
also disputed the
American government's calculation of cost overruns, saying that
accounting
rules had recently been changed in a way that inflated the figures.
The official, Cliff Mumm, who is president of the Bechtel
infrastructure
division, predicted that the project would fail if the government
pressed
ahead, as the briefing papers indicate that it would. Because of
the rise of
sectarian militias in southern Iraq, Mr. Mumm said, "it is not a
good use of the
government's money" to try to finish the project.
"And we do not think it can be finished," he said.
Beyond the consequences for health care in southern Iraq,
abandoning the
project could be tricky politically because of the high-profile
support from
Mrs. Bush and Ms Rice. Congress allocated $50 million to the Basra
Children's
Hospital in late 2003 as part of an $18.4 billion reconstruction
package for
Iraq. Now the government estimates that the cost overruns are so
great that the
project will cost as much as $120 million to complete and will not
be finished
before September 2007, nearly a year later than planned. Some other
estimates
put the overruns even higher. Kadhim Hassan, general director of
the Basra
Health Department, said the project would be no more than 40
percent complete
once the original $50 million, much of which is going to
subcontractors, had
been used up. He said little work had been done for months.
While Bechtel pointed to security problems in delaying the
project and
increasing its cost, the Iraqis generally rejected that view.
"The pretexts given by Bechtel to the Iraqi government to
justify its
failure in finishing the project are untrue and unacceptable,
especially the ones
regarding the rise in security expenses," said Sheik Abu Salam al-
Saedi, a
member of the Basra provincial council.
Western engineers were seldom seen at the project, Mr. Saedi
said, adding
that it was simply mismanaged. Mr. Saffar, of the Health Ministry
in Baghdad,
and an Iraqi contractor in Basra both asserted that Bechtel's use of a
complicated chain of subcontractors was part of the problem.
Bechtel hired a Jordanian company, for example, to oversee work
by local
Iraqi construction companies. The American government wasted money
by going
through such a complex chain of companies rather than working
directly with the
Iraqis who would do the work anyway, Mr. Saffar said.
"Our counterparts should have full faith in the Iraqi
companies," Mr.
Saffar said.
That kind of turmoil was far from the minds of planners and
supporters
when the hospital project was conceived and promoted. Mrs. Bush and
Ms. Rice
were unwavering supporters, and Project HOPE, a charitable
organization, planned
to provide at least $50 million in medical equipment.
In a gala for Project HOPE last October, Mrs. Bush praised the
project,
describing its plan for 94 beds, a state-of-the-art neonatal unit,
a linear
particle accelerator for radiation therapy and CAT scanners. Ms.
Rice added that
the hospital "will make a real difference, a life-saving and lasting
difference, to the thousands of children and their families."
But like so many other reconstruction projects in Iraq, the
hospital was
blindsided by changing realities on the ground. Once considered a
relatively
tranquil section of Iraq, the south has become increasingly
dangerous with the
rise of Shiite militias in the past two years - so much so, said
Mr. Mumm, the
Bechtel official, that construction was often forced to shut down.
With those delays came increasing costs as the company absorbed
the
expenses of housing, feeding and protecting its work force while
the work sat idle,
Mr. Mumm said. One consequence was that the nonconstruction costs
usually
referred to as overhead or administrative costs skyrocketed.
Bechtel estimated that as much as 50 percent of its expenses on
the
project were overhead costs, which were paid with American money
separate from the
$50 million construction contract.
David Snider, a spokesman for the United States Agency for
International
Development, the State Department agency in charge of the project,
said that
technically, Bechtel's contract was not being terminated because
the contract
did not actually require the company to complete the hospital.
"They are under a ‘term contract,' which means their job is
over when
their money ends," Mr. Snider said. So despite not finishing the
hospital, he
said, "they did complete the contract."
A confidential report commissioned by the development agency
criticizes
it for failing to properly account for all of the costs of building a
functioning hospital. The agency is likely to face further
criticism as it seeks
additional money to complete the hospital as part of an Iraq
reconstruction program
that has increasingly come to be seen as overpriced and ineffective.
The State Department briefing papers describing problems with the
hospital project say the United States has been approached by Spain
with a potential
offer to donate some of the money needed to finish it. If that
money is not
forthcoming, the papers say, the United States will shift funds now
allocated to
the crucial oil infrastructure reconstruction to complete the
hospital.
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<DIV><FONT size=5>Series of Woes Mar Iraq Project Hailed as Model</
FONT></DIV>
<DIV><BR> By James Glanz
<BR> The New York Times </DIV>
<P> Friday 28 July 2006
<P> Baghdad, Iraq - <STRONG>The United
States is dropping Bechtel, the American construction giant, from a
project to build a high-tech children's hospital in the southern
Iraqi city of Basra</STRONG> after <STRONG>the project fell nearly
a year behind schedule and <EM>exceeded its expected cost by as
much as 150 percent</EM></STRONG><EM>.</EM>
<P> Called the Basra Children's Hospital,
the project has been consistently championed by the first lady,
Laura Bush, and Secretary of State Condoleezza Rice, and was
designed to house sophisticated equipment for treating childhood
cancer.
<P> Now it becomes<STRONG> the latest in a
series of American taxpayer-financed projects in Iraq to face
overruns, delays and cancellations</STRONG>. Earlier this year, the
Army Corps of Engineers canceled more than $300 million in
contracts held by Parsons, another American contractor, to build
and refurbish hospitals and clinics across Iraq.
<P> American and Iraqi government officials
described the move to drop Bechtel in interviews on Thursday, and
Ammar al-Saffar, a deputy health minister in Baghdad, allowed a
reporter to take notes on briefing papers on the subject he said he
had recently been given by the State Department.
<P> The United States will "disengage
Bechtel and transfer program and project management" to the Army
Corps of Engineers, the papers say. Bechtel, the State Department
agency in charge of the work and the Health Department in Basra all
confirmed that the company would be leaving the project, but the
reasons are a matter of deep disagreement.
<P> The Iraqis assert that management
blunders by the company have caused the project to teeter on the
verge of collapse; the American government says Bechtel did the
best it could as it faced everything from worsening security to
difficult soil conditions.
<P> A senior company official said Thursday
that for its part Bechtel recommended that the work be mothballed
and in essence volunteered to leave the project because the
security problems had become intolerable. He also disputed the
American government's calculation of cost overruns, saying that
accounting rules had recently been changed in a way that inflated
the figures.
<P> The official, Cliff Mumm, who is
president of the Bechtel infrastructure division, predicted that
the project would fail if the government pressed ahead, as the
briefing papers indicate that it would. Because of the rise of
sectarian militias in southern Iraq, Mr. Mumm said, "it is not a
good use of the government's money" to try to finish the project.
<P> "And we do not think it can be
finished," he said.
<P> Beyond the consequences for health care
in southern Iraq, abandoning the project could be tricky
politically because of the high-profile support from Mrs. Bush and
Ms Rice. Congress allocated $50 million to the Basra Children's
Hospital in late 2003 as part of an $18.4 billion reconstruction
package for Iraq. Now the government estimates that the cost
overruns are so great that the project will cost as much as $120
million to complete and will not be finished before September 2007,
nearly a year later than planned. Some other estimates put the
overruns even higher. Kadhim Hassan, general director of the Basra
Health Department, said the project would be no more than 40
percent complete once the original $50 million, much of which is
going to subcontractors, had been used up. He said little work had
been done for months.
<P> While Bechtel pointed to security
problems in delaying the project and increasing its cost, the
Iraqis generally rejected that view.
<P> "The pretexts given by Bechtel to the
Iraqi government to justify its failure in finishing the project
are untrue and unacceptable, especially the ones regarding the rise
in security expenses," said Sheik Abu Salam al-Saedi, a member of
the Basra provincial council.
<P> Western engineers were seldom seen at
the project, Mr. Saedi said, adding that it was simply mismanaged.
Mr. Saffar, of the Health Ministry in Baghdad, and an Iraqi
contractor in Basra both asserted that Bechtel's use of a
complicated chain of subcontractors was part of the problem.
<P> Bechtel hired a Jordanian company, for
example, to oversee work by local Iraqi construction companies. The
American government wasted money by going through such a complex
chain of companies rather than working directly with the Iraqis who
would do the work anyway, Mr. Saffar said.
<P> "Our counterparts should have full faith
in the Iraqi companies," Mr. Saffar said.
<P> That kind of turmoil was far from the
minds of planners and supporters when the hospital project was
conceived and promoted. Mrs. Bush and Ms. Rice were unwavering
supporters, and Project HOPE, a charitable organization, planned to
provide at least $50 million in medical equipment.
<P> In a gala for Project HOPE last October,
Mrs. Bush praised the project, describing its plan for 94 beds, a
state-of-the-art neonatal unit, a linear particle accelerator for
radiation therapy and CAT scanners. Ms. Rice added that the
hospital "will make a real difference, a life-saving and lasting
difference, to the thousands of children and their families."
<P> But like so many other reconstruction
projects in Iraq, the hospital was blindsided by changing realities
on the ground. Once considered a relatively tranquil section of
Iraq, the south has become increasingly dangerous with the rise of
Shiite militias in the past two years - so much so, said Mr. Mumm,
the Bechtel official, that construction was often forced to shut down.
<P> With those delays came increasing costs
as the company absorbed the expenses of housing, feeding and
protecting its work force while the work sat idle, Mr. Mumm said.
One consequence was that the nonconstruction costs usually referred
to as overhead or administrative costs skyrocketed.
<P> Bechtel estimated that as much as 50
percent of its expenses on the project were overhead costs, which
were paid with American money separate from the $50 million
construction contract.
<P> David Snider, a spokesman for the United
States Agency for International Development, the State Department
agency in charge of the project, said that technically, Bechtel's
contract was not being terminated because the contract did not
actually require the company to complete the hospital.
<P> "They are under a ‘term contract,' which
means their job is over when their money ends," Mr. Snider said. So
despite not finishing the hospital, he said, "they did complete the
contract."
<P> A confidential report commissioned by
the development agency criticizes it for failing to properly
account for all of the costs of building a functioning hospital.
The agency is likely to face further criticism as it seeks
additional money to complete the hospital as part of an Iraq
reconstruction program that has increasingly come to be seen as
overpriced and ineffective.
<P> The State Department briefing papers
describing problems with the hospital project say the United States
has been approached by Spain with a potential offer to donate some
of the money needed to finish it. If that money is not forthcoming,
the papers say, the United States will shift funds now allocated to
the crucial oil infrastructure reconstruction to complete the
hospital. </P></BODY></HTML>
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