Global Policy Forum

By Ewen MacAskill

A US congressional inspection team set up to monitor reconstruction in Iraq today publishes a scathing report of failures by contractors, mainly from the US, to carry out projects worth hundreds of millions of dollars. In one case, the inspection team found that three years after the invasion only six of 150 health centres proposed for Iraq had been completed by a US contractor, in spite of 75% of the $186m (£100m) allocated having been spent.

The report says: "Fourteen more will be completed by the contractor, and the remaining facilities, which are partially constructed, will have to be completed by other means." The inspectors blame the failure in this instance on management problems and security concerns. The danger facing foreigners in Iraq was highlighted yesterday when a roadside bomb 30 miles south of Baghdad killed three private security firm staff and wounded two others. One of the wounded is British, the Foreign Office said.

The detailed and lengthy report on work projects in Iraq has been drawn up by Stuart Bowen, the special inspector general for Iraq reconstruction (SIGIR). Mr Bowen's office was set up after Congress expressed concern about the slow rate of reconstruction and the misuse of funds on a massive scale. The report says Mr Bowen's inspection team is investigating 72 cases of alleged fraud and corruption, and is pursuing leads not only in the US but in Europe and the Middle East. In March, investigators conducted a successful sting operation which led to the arrest of a contractor who offered a bribe to one of its undercover agents.

The report says many completed projects "have delivered positive results, but there exists a gap between US project outputs and the delivery of essential services to Iraqis." While progress has been made in the construction of schools and police stations, many Iraqis still have no access to clean water, and electricity supplies in Baghdad are still below pre-invasion levels. The inspectors say that economic recovery is being hampered by the failure to restore Iraq's oil production to levels before 2003. The report says that corruption in the oil and gas sector is a continuing problem that could have "devastating effects" on reconstruction in Iraq.

The inspectors audited Task Force Shield, a project established in September 2003 to build Iraq's capacity to protect its oil, gas and electrical infrastructure, and found significant shortcomings. The report concludes the project "failed to meet its goals because it was burdened by a lack of clear management structure and poor accountability. There were also indications of potential fraud, which are now under review by Sigir investigators." Up to last month, Washington had invested more than $265m to improve the protection of energy infrastructure in Iraq. Task Force Shield sought to cover 340 key installations, 4,000 miles of oil pipeline, and 8,000 miles of electrical transmission lines.

In a separate section, the report notes that a former contractor and former senior staffer in the now defunct US-led coalition government are facing jail sentences 30 to 40 years on corruption charges. The contractor will have to pay $3.6m in restitution and forfeit $3.6m in assets. Apart from mismanagement and corruption, the report identifies continuing attacks by Iraqi insurgents as one of the main reasons for the delays and failures. It says: "Insurgent activity continues to impede ongoing reconstruction projects and interrupt their transition to Iraqi control.

"But the attacks remain concentrated in a few areas, leaving daily life in much of the rest of Iraq - particularly the Kurdish north and some areas of the south - in a state of gradual recovery." The report adds: "Corruption is another form of insurgency. This second insurgency can be defeated only through the development of democratic values and systems, especially the evolution of effective anti-corruption institutions." Iraq's president, Jalal Talabani, said yesterday that he and US officials had met with insurgents and that a deal with some groups to end violence could be reached. In a statement, Mr Talabani said: "I believe that a deal could be reached with seven armed groups that visited me."

Unfinished Business

Congress has approved $21bn for reconstruction since the invasion, of which 67% has been allocated. Precisely how much has been squandered is not known but the congressional team has been carrying out investigations and publishes quarterly reports. In the latest, it highlights the case of a US company which was given a contract to build 150 health centres in Iraq. Only six have been built, all in Baghdad, in spite of 75% of its allocated $186m having been spent. The report says the contractor will only complete a further 14. Last year the congressional team reported that almost $9bn in Iraqi oil revenues disbursed to ministries had gone missing.