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The Calamity Howler put together a few N.Y.T. pieces on war costs: IDLE CONTRACTORS ADD MILLIONS TO IRAQ REBUILDING By James Glanz New York Times October 25, 2006 Overhead costs have consumed more than half the budget of some reconstruction projects in Iraq, according to a government estimate released yesterday, leaving far less money than expected to provide the oil, water and electricity needed to improve the lives of Iraqis. The report provided the first official estimate that, in some cases, more money was being spent on housing and feeding employees, completing paperwork and providing security than on actual construction. Those overhead costs have ranged from under 20% to as much as 55% of the budgets, according to the report, by the Special Inspector General for Iraq Reconstruction. On similar projects in the United States, those costs generally run to a few percent. The highest proportion of overhead was incurred in oil-facility contracts won by KBR Inc., the Halliburton subsidiary formerly known as Kellogg Brown & Root, which has frequently been challenged by critics in Congress and elsewhere. The actual costs for many projects could be even higher than the estimates, the report said, because the United States has not properly tracked how much such expenses have taken from the $18.4 billion of taxpayer-financed reconstruction approved by Congress two years ago. The report said the prime reason was not the need to provide security, though those costs have clearly risen in the perilous environment, and are a burden that both contractors and American officials routinely blame for such increases. Instead, the inspector general pointed to a simple bureaucratic flaw: the United States ordered the contractors and their equipment to Iraq and then let them sit idle for months at a time. The delay between “mobilization,” or assembling the teams in Iraq, and the start of actual construction was as long as nine months. “The government blew the whistle for these guys to go to Iraq and the meter ran,” said Jim Mitchell, a spokesman for the inspector general’s office. “The government was billed for sometimes nine months before work began.” The findings are similar to those of a growing list of inspections, audits and investigations that have concluded that the program to rebuild Iraq has often fallen short for the most mundane of reasons: poorly written contracts, ineffective or nonexistent oversight, needless project delays and egregiously poor construction practices. “This report is the latest chapter in a long, sad and expensive tale about how contracting in Iraq was more about shoveling money out the door than actually getting real results on the ground,” said Stephen Ellis, a vice president at Taxpayers for Common Sense in Washington. “These contracts were to design and build important items for oil infrastructure, hospitals and education, but in some cases more than half of the money padded corporate coffers instead,” he said. Although the federal report places much of the burden for the charges squarely on the shoulders of United States officials in Baghdad, the findings varied widely over a sampling of contracts examined by auditors, from a low of under 20% for some companies to a high of over 55%. One oil contract awarded to a joint venture between Parsons, an American company, and Worley, from Australia, had overhead costs of at least 43%, the report found. One contract held by Parsons alone to build hospitals and prisons had overhead of at least 35%; in another, it was 17%. The lowest figure was found for certain contracts won by Lucent, at 11%, but the report indicates that substantial portions of the overhead in those cases could not be determined. The report did not explain why KBR’s overhead costs on those contracts — the contracts totaled about $296 million --- were more than ten percent higher than those at the other companies audited. Despite past criticism of KBR, the Army, whicch administers those contracts, has generally agreed to pay most of the costs claimed by the company. Melissa Norcross, a spokeswoman for KBR, said in a written reply to questions, “It is important to note that the special inspector general is not challenging any of KBR’s costs referenced in this report.” “All of these costs were incurred at the client’s direction and for the client’s benefit,” she said, referring to the Army Corps of Engineers, which is in charge of the oil contract. But a frequent Halliburton critic, Representative Henry A. Waxman, a California Democrat who is the ranking minority member of the House Committee on Government Reform, disputed those assurances. “It’s incomprehensible that over $160 million --- more than half the value of the contract --- was squandered on overhead,” Mr. Waxman said in a written statement. The majority leader of the same committee, Thomas M. Davis III, a Virginia Republican, declined to comment. A spokeswoman for Parsons, Erin Kuhlman, said the United States categorized overhead and construction costs differently from contract to contract in Iraq, making it difficult to make direct comparisons. “Parsons incurred, billed and reported actual costs as directed by the government,” she said. In Iraq, where construction materials are scarce and contractors must provide security for work sites and housing for Western employees, officials have said they expect the overhead to be at least 10 percent, but the contractors and American officials have grudgingly conceded that the true costs have turned out to be higher. But even the high of 55% could be an underestimate, Mr. Mitchell said, because the government often did not begin tracking overhead costs for months after the companies mobilized. He added that because of the haphazard way in which the government tracked the costs, it was not possible to say how well the figures reflected overhead charges in the entire program. The report’s conclusions were drawn from $1.3 billion in contracts for which United States government overseers actually made an effort to track overhead costs, of the total of $18.4 billion set aside for reconstruction in specific supplemental funding bills for the 2006 fiscal year. When all American and Iraqi contributions are added up, various estimates for the cost of the rebuilding program range from $30 billion to $45 billion. Language included in the Defense Authorization Act, signed by President Bush last week, states that the inspector general’s office will halt its examination of those expenditures by October of next year. Maj. Gen. William H. McCoy, who until recently commanded the Persian Gulf region division of the Corps of Engineers, disputed some of the inspector general’s findings in a letter appended to the report. Things like “waiting for concrete to cure” could still be taking place during what seem to be periods of inactivity, General McCoy wrote, so a quiet period “does not mean that the project is not moving forward.” But many of the delays came during 2004 and took place in response to political developments in Iraq, the inspector general’s report says. The American occupation government, the Coalition Provisional Authority, mobilized many of the companies early that year. After the authority went out of existence in June 2004, handing sovereignty to the Iraqi government, top American officials then kept the companies idle for months as the officials rewrote the rebuilding plan, and ran up costs as little work was done. IRAQ AND YOUR WALLET By Nicholas D. Kristof New York Times October 24, 2006 For every additional second we stay in Iraq, we taxpayers will end up paying an additional $6,300. So aside from the rising body counts and all the other good reasons to adopt a timetable for withdrawal from Iraq, here’s another: We are spending vast sums there that would be better spent rescuing the American health care system, developing alternative forms of energy and making a serious effort to reduce global poverty. In the run-up to the Iraq war, Donald Rumsfeld estimated that the overall cost would be under $50 billion. Paul Wolfowitz argued that Iraq could use its oil to “finance its own reconstruction.” But now several careful studies have attempted to tote up various costs, and they suggest that the tab will be more than $1 trillion --- perhaps more than $2 trillion. The higher sum would amount to $6,600 per American man, woman and child. “The total costs of the war, including the budgetary, social and macroeconomic costs, are likely to exceed $2 trillion,” Joseph Stiglitz, the Nobel-winning economist at Columbia, writes in an updated new study with Linda Bilmes, a public finance specialist at Harvard. Their report has just appeared in the Milken Institute Review, as an update on a paper presented earlier this year. Just to put that $2 trillion in perspective, it is four times the additional cost needed to provide health insurance for all uninsured Americans for the next decade. It is 1,600 times Mr. Bush’s financing for his vaunted hydrogen energy project. Another study, by two economists at the American Enterprise Institute, used somewhat different assumptions and came up with a lower figure — about $1 trillion. Those economists set up a nifty Web site, www.aei-brookings.org/iraqcosts, where you can tinker with the underlying assumptions and come up with your own personal estimates. Of course, many of the costs are hidden and haven’t even been spent yet. For example, more than 3,000 American veterans have suffered severe head injuries in Iraq, and the U.S. government will have to pay for round-the-clock care for many of them for decades. The cost ranges from $600,000 to $5 million per person. Then there are disability payments that will continue for a half-century. Among veterans of the first gulf war --- in which ground combat lasted only 100 hours --- 40% ended up receiving disability payments, still costing us $2 billion each year. We don’t know how many of today’s veterans will claim such benefits, but in the first quarter of this year more people sought care through the Department of Veterans Affairs than the Bush administration had budgeted for the entire year. The war has also forced the military to offer re-enlistment bonuses that in exceptional circumstances reach $150,000. Likewise, tanks, helicopters and other battlefield equipment will have to be replaced early, since the Pentagon says they are being worn out at up to six times the peacetime rate. The administration didn’t raise taxes to pay for the war, so we’re financing it by borrowing from China and other countries. Those borrowing costs are estimated to range from $264 billion to $308 billion in interest. Then there are economic costs to the nation as a whole. For example, the price of oil was in the $20- to $30-a-barrel range early in this decade but has now shot up to more than $50, partly because of the drop in Iraq’s oil exports and partly because of war-related instability in the Middle East. Professors Stiglitz and Bilmes note that if just $10 of the increase is attributable to the war, that amounts to a $450 billion drag on the economy over six years. The bottom line is that not only have we squandered 2,800 American lives and considerable American prestige in Iraq, but we’re also paying $18,000 per household to do so. We still face the choice of whether to remain in Iraq indefinitely or to impose a timetable and withdraw U.S. troops. These studies suggest that every additional year we keep our troops in Iraq will add $200 billion to our tax bills. My vote would be to spend a chunk of that sum instead fighting malaria, AIDS and maternal mortality, bolstering American schools, and assuring health care for all Americans. We’re spending $380,000 for every extra minute we stay in Iraq, and we can find better ways to spend that money. MONEY DOWN THE DRAIN IN IRAQ Editorial New York Times October 26, 2006 When the full encyclopedia of Bush administration misfeasance in Iraq is compiled, it will have to include a lengthy section on the contracting fiascos that wasted billions of taxpayer dollars in the name of rebuilding the country. It isn’t only money that was lost. Washington’s disgraceful failure to deliver on its promises to restore electricity, water and oil distribution, and to rebuild education and health facilities, turned millions of once sympathetic Iraqis against the American presence. Their discovery that the world’s richest, most technologically advanced country could not restore basic services to minimal prewar levels left an impression of American weakness and, worse, of indifference to the well-being of ordinary Iraqis. That further poisoned a situation already soured by White House intelligence breakdowns, military misjudgments and political blunders. The latest contracting revelations came in a report issued Tuesday by the office of the Special Inspector General for Iraq Reconstruction. The office reviewed records covering $1.3 billion out of the $18.4 billion that Congress voted for Iraq reconstruction two years ago. Reported overhead costs ran from a low of 11% for several contracts awarded to Lucent to a high of 55% for, you guessed it, the Halliburton subsidiary, KBR Inc. On similar projects in the United States, overhead is typically just a few percent. Given the difficult security environment in Iraq, overhead was expected to run closer to ten percent. But in many of the contracts examined, it ran much, much higher, in some cases consuming over half the allocated funds. And the report may have actually underestimated total overhead because the government agencies that were supposed to be supervising these reconstruction projects sometimes failed to systematically track overhead expenses. The main explanation for these excessive overhead rates turned out to be not special security costs but simply the costly down time that resulted from sending workers and equipment to Iraq months before there was any actual work for them to do. That is yet another example of the shoddy contract writing, lax oversight and absent supervision that has consistently characterized Washington’s approach to Iraq reconstruction from the start. Bush administration incompetence, not corporate greed, is the chief culprit. Still, these charges are one more example of how the favored American companies lucky enough to be awarded reconstruction contracts made large sums of money while the Iraqis failed to get most of the promised benefits. As Americans now look for explanations of how things went so horribly wrong in Iraq, they should not overlook the shameful breakdowns in reconstruction contracting. They need to insist that Congress impose tough new rules on the Pentagon to ensure more competitive bidding, tighter contract writing and more rigorous supervision. That is the best way to ensure that such a costly and damaging failure never happens again. |
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