Toxic thinking and undertakings cannot but
produce poisoned fruit.
Lawry
From: [EMAIL PROTECTED]
[mailto:[EMAIL PROTECTED] On
Behalf Of Darryl or Natalia
Sent: Friday, October 27, 2006
4:30 PM
To: [email protected]
Subject: [Futurework] cost of
downtime in Iraq
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.
