Global Policy Forum

By Charles J. Hanley

America's big builders invaded Iraq three years ago, hard on the heels of U.S. troops and tanks. Now the reconstruction billions are drying up so they're pulling out, leaving both completed and unfinished projects in the hands of an Iraqi government unprepared to manage either.

The Oct. 1 start of the U.S. government's 2007 fiscal year signalled an end to U.S. aid for new Iraq reconstruction. "We're really focusing now on helping Iraqis do this themselves in the future," said Daniel Speckhard, reconstruction chief at the U.S. Embassy in Baghdad, even though he admits that many Iraqi government ministries aren't able yet to pick up where the Americans leave off. "They're very bad at sustainment in terms of programs and projects," is how he phrases the problem.

In 2003, Congress committed almost US$22 billion to a three-year program to help Iraq climb back from the devastation of war and the looting that followed, and from years of neglect under UN economic sanctions. The money, the biggest such U.S. effort since the Marshall Plan in Europe after the Second World War, was invested mainly in American companies to carry out thousands of projects from rebuilt oil pipelines and upgraded power plants to buying textbooks, ambulances, and planting nurseries to replenish Iraq's groves of date palms.

But the U.S. and Iraqi planners, engineers and construction crews faced major obstacles in a landscape wracked by anti-U.S. insurgency and daily violence, in an economy bled by corruption, and in a country abandoned by thousands of its skilled workers. Almost $6 billion in reconstruction aid was diverted to training Iraqi police and troops and to other security costs, adding to what U.S. auditors now dub a "reconstruction gap."

Fewer than half the electricity and oil projects planned have thus far been completed, internal documents of the U.S. reconstruction command show. Scores of other projects were cancelled. In Baghdad people spend most of their day without electricity, and spend hours in line for gasoline and other scarce fuels.

Although the Americans will complete jobs already under contract, probably into 2008, many in the U.S. program are disappointed Congress chose not to underwrite essential new projects. "I always thought there would be value in having more money. (Other) donors haven't been coming in," noted Maj. Gen. William McCoy, senior U.S. army engineer overseeing reconstruction. Of almost $14 billion pledged in 2003 by non-U.S. donors, barely $3 billion has been disbursed.

From one key Iraqi's perspective, much of the money earmarked for reconstruction has been misspent. "Huge amounts of funds were wasted because of bureaucracy, corruption, incapacity and the spending of money on unimportant projects," said Ali Baban, planning minister in Iraq's five-month-old government.

Big names in U.S. engineering-construction - Parsons, Bechtel, Halliburton - have been criticized for poor performance or overbilling. The Special Inspector-General for Iraq Reconstruction last month said renovation of Baghdad's police academy, overseen by Parsons Corp., was so shoddy that sewage dripped through a new dormitory's ceilings. "My biggest disappointment has been the issues we're having to recover from with bad work by American contractors," McCoy said by telephone from Baghdad.

The auditors say, however, that most projects show good workmanship and quality control. American officials point particularly to what Speckhard called a "very significant success in helping the oil sector get back on its feet" - vital to Iraq's future, since more than 90 per cent of its government revenues come from oil sales.

Reconstruction officials point, too, to U.S.-financed work on Iraq's schools - rehabilitation of most of the 12,000 schools needing it, training of more than 100,000 teachers - and to progress in restoring or extending drinking water and sewer lines to more Iraqis.

The greatest problems plague the giant U.S. effort to restore Iraqi electricity. U.S. engineers have boosted Iraq's potential generating capacity but that power hasn't made it to the people. Baghdad gets no more than four to six hours of electricity a day. Iraqi officials are quick to blame insurgent sabotage, but engineers say it's often utility workers outside Baghdad who cut lines, keeping power in their areas. McCoy also attributed shortfalls to a surging demand for electricity, erratic fuel supplies and poor maintenance - a point the Iraqis concede. "Most power stations are old and need constant maintenance that cannot be provided," said Aziz Sultan, Electricity Ministry spokesman. That lack of "sustainment" worries the Americans.

Auditors last year found one-quarter of completed water-treatment plants had broken down. "Concerns remain about Iraq's capacity to operate its expanded and modernized infrastructure," the special inspector-general, Stuart W. Bowen, reported on July 31. Limited new U.S. spending will focus on training Iraqis in operations and maintenance. The Americans worry, too, about the Baghdad government's ability to invest oil funds effectively. "A second real challenge in this country is to make sure money is spent wisely and avoid corruption," Speckhard said.

Corruption and theft, petty and grand, touches every corner of Iraq. American officials say tribal chiefs sell material from downed power lines and then charge "tariffs" for access to repair them. Hundreds of Oil Ministry staff have been fired after allegedly smuggling Iraq's poorly monitored oil or fuel products out of the country or into the black market. Even medicines vanish, leaving hospitals in short supply.

As the U.S. fiscal year ended, the army congratulated its reconstruction teams on what they've accomplished in Iraq. "Never has so much been done, so well and so quickly, by so few," it said. One measure of sacrifice: At least 575 Iraqi and other contract workers, many in reconstruction, have been killed since 2003.

But huge challenges lie ahead in a country where a third or more of the work force remains unemployed. On electricity alone, the Iraqis estimate they'll need to find $20 billion more to finish the modernization. Carlos Pascual, who headed the reconstruction office at the State Department until this year, said Iraq's sectarian bloodletting, unsettled politics and paralyzed decision-making make hope of a quick recovery illusory. "There were people seriously committed to try to put in place programs to improve the lives of Iraqis," the ex-ambassador said. "The problem was it was never happening in a context that could make it sustainable."

Long delays, cost overruns marred Iraq rebuilding program

In a handful of high-profile cases, Iraq reconstruction projects were marred by cost overruns, missed deadlines and general poor performance by major U.S. engineering companies.

Four examples:

PIPELINE

In 2004, the Army found that Halliburton Co. subsidiary Kellogg, Brown & Root had spent all US$76 million allocated for running a pipeline beneath the Tigris River, but completed only 28 per cent of the drilling. It had gone ahead despite expert warnings the drilling would fail. A new contractor switched to a more feasible route.

CLINICS

Last March, U.S. auditors found that Parsons Corp. had spent US$186 million over two years, 77 per cent of the budget, but had completed only six of 150 primary health care clinics planned for Iraq. Army engineers said Parsons failed to supervise subcontractors' work. The contract was terminated by mutual agreement.

PRISONS

In June and July, the army terminated Parsons' contracts for building two prisons because of cost overruns and protracted delays. A month after the March 2006 delivery date on a prison outside the southern city of Nasariyah, the project was only 28 per cent complete.

HOSPITAL

Bechtel Corp.'s work on a children's hospital in Basra bogged down so badly that it said its September 2006 deadline would have to be moved to July 2007, and its US$50 million cost might double. In July, Bechtel was dropped from the project, which was put on hold.