What Went Wrong with the Rebuilding of Iraq?

First of a two-part series.

Read Part Two

There is little to show for the tens of billions of dollars spent over the last four years to rebuild Iraq. Plans that began with high hopes and were aimed at improving everything from Iraq's dilapidated infrastructure to its health care and education systems have instead become mired in corruption, waste and mismanagement.

Shortly after Baghdad fell in 2003, huge contracts were awarded to several U.S. companies. Some were no-bid, such as the $1.4 billion contract handed to Halliburton to rebuild Iraq's oil industry. For other contracts, there was limited competition.

"Basically, these were contracts that said to a contractor, 'I'm going to have hundreds of projects all over the country. I'm not quite sure what those projects are going to look like,' " said Steve Schooner, the co-director of the government procurement law program at George Washington University Law School.

The idea was for the contractors to get into Iraq quickly and then await further orders, Schooner said.

The speed with which the reconstruction contracts were awarded inevitably led to some mistakes, said Earnie Robbins, a senior vice president with Parsons Corp., a California-based construction firm that was awarded a roughly $1 billion contract for projects in Iraq.

"They actually issued us a site to build a facility that, when we went to the GPS coordinates provided — or when we tried to — it was discovered that that site was actually not in Iraq; it was in Iran," said Robbins.

He said several other potential sites were in the middle of lakes or riverbeds, while another site was already occupied by a mosque.

Even so, the expectations for reconstructing Iraq were enormous, as was the pressure from Congress and the administration to show tangible results.

"Everybody felt that there was that need to win hearts and minds and make sure that the reconstruction program was moving forward," said Ginger Cruz, the senior adviser to the special inspector-general for Iraq reconstruction. "So the program moved forward, despite the fact that everyone understood there were not enough contracting officers, and there was not enough oversight to adequately manage the funds on the ground."

Thousands of reconstruction contracts were awarded. And there was plenty of money to go around, including an initial $18 billion appropriated by Congress. Another $20 billion was available from the so-called Development Fund for Iraq — money that was derived from, among other things, Iraqi oil sales. Federal investigations have found that the money was quickly spent, with little planning or accounting.

It was a free-for-all climate best demonstrated when Paul Bremer, the head of the Coalition Provisional Authority, successfully requested that $12 billion in cash be shipped to Iraq. U.S. Rep. Henry Waxman (D-CA), now chairman of the House Committee on Oversight and Government Reform, said he was astonished when he heard about it.

"It's hard even now to imagine $12 billion in hundred-dollar bills, wrapped into bricklike bundles, then put on huge pallets and brought over by troop carrier airplanes to be dispersed in a war zone," Waxman said.

"We have no idea where that money went. Of the $12 billion, $8.8 billion is unaccounted for," he said.

Bremer defended his action, suggesting it was naïve to try to impose Western-style accounting practices in Iraq during a war. Several investigations led by Stuart Bowen, the special inspector-general for Iraq reconstruction, have found that the reconstruction effort was riddled with waste, fraud, corruption and shoddy construction. Bowen told NPR's All Things Considered about one particularly bad construction site he investigated — a $75 million police training academy built by Parsons Corp.

"Essentially, when they put in the plumbing, they had no fittings, so they just joined plumbing pipes, cemented them together," he said. "The connections burst once they started to be used, and the sewage thus leaked from the bathrooms down through the building — and into light fixtures and through the ceilings."

Bowen's reports also detail many projects that have been successfully completed — among them, water treatment facilities, power plants, train stations and schools. But most of that work was done before the security situation deteriorated in Iraq.

By mid-2004, major projects had ground to a halt because of the insurgency, sectarian warfare and the soaring cost of security. One such project was a $50 million hospital in Basra awarded to Bechtel Corp.

"At that time, total, there were 24 people who had died trying to do that children's hospital. We finished the structural part of it, and our recommendation was that no more people and no more money should be spent on it until the situation had settled," said Clifford Mumm, a senior vice president at Bechtel, which received a total of $2.4 billion in contracts.

Many construction projects have been sabotaged. Those that haven't stand idle — because Iraqis are unwilling to work there, or they can't get fuel to run equipment.

The violence has also sparked a "brain drain" as professionals flee Iraq, leaving unskilled workers to try to carry on.

It's a long-term problem, Mumm said.

"You can build anything, and if you just hand it to somebody and they don't know how to operate it, then you really didn't do very much," he said.

"We were cognizant of that all the way through. We spent over 600,000 hours of just training people, and we did that training in Arabic," Mumm said.

Many factories that were rebuilt around Iraq are now shuttered. Deputy Under-Secretary of Defense for Business Transformation Paul Brinkley has spent much of the past year traveling around Iraq, trying to revitalize and spark international investment in those factories.

"All I'm asking American or other companies to do is come to Iraq — I'll put a blanket of security around you, I'll go with you out into areas of the country with my team," he said. "We'll show you factories, and if there's a good being manufactured, all I'm asking you to do is consider purchasing some of it from an Iraqi company."

Now, the reconstruction money has dried up. Nearly all of the U.S. commitment of $32 billion dollars is spoken for, and large brick-and-mortar projects have given way to more local efforts.

The United States is trying to pressure Iraqis to do more for themselves, including spending their own money.

Iraq's proposed budget for 2007 is more than $40 billion.

Max Boot, a senior fellow at the Council on Foreign Relations, said some of that money should go to help rebuild places such as Ramadi, in Anbar province, which was heavily damaged in fighting. Boot, who just returned from that area, said local troops and tribal leaders in Ramadi have been working with U.S. forces for the past few months. He said rebuilding would show the people in Anbar that there are benefits to cooperating with the U.S. and Iraqi governments, but so far, no money has come from Baghdad.

"It's hard to know whether it's issues of incapacity, because the Iraqi government can't get its act together enough to send some money to Anbar, or whether they don't want to get their act together, and the Shiites in control don't want to help the Sunnis in Anbar," Boot said.

U.S. officials once described reconstruction aid for Iraq as a gift from the American people. But after four years and tens of billions of dollars invested in reconstruction, Iraqis have less electricity, less clean water and fewer jobs than they did before the U.S. invasion.

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