Global Policy Forum

Bechtel Meets Goals on Fewer Than Half


By James Glanz

New York Times
July 26, 2007

One of the largest American contractors working in Iraq, Bechtel National, met its original objectives on fewer than half of the projects it received as part of a $1.8 billion reconstruction contract, while most of the rest were canceled, reduced in scope or never completed as designed, federal investigators have found in a report released yesterday. But the report, by the Special Inspector General for Iraq Reconstruction, an independent agency, places a large share of the blame for the failures on the government overseers at the United States Agency for International Development who administered the contract. The aid agency assigned just two people in Iraq to oversee the giant contract, which included some 24 major projects and 150 subcontractors and stipulated that all invoices be approved or denied in just 10 days.

The report is the first of a planned series of audits of Western contractors that have received large slices of the roughly $40 billion in American taxpayer money that has been spent on the troubled program to rebuild Iraq. Previous audits have looked at individual projects but never the performance across Iraq of a single contractor.

Stuart W. Bowen Jr., who heads the special inspector general's office, said the United States government clearly shared responsibility with the company for the project failures. ''I would say there's fault on both sides,'' Mr. Bowen said in an interview yesterday. He added that neither the aid agency nor the United States Army Corps of Engineers, which also oversaw aspects of the contract, ever came close to filling all their staff positions in Iraq. ''This isn't so much an indictment of Bechtel as it is a criticism of the system,'' said Stephen Ellis, a vice president at Taxpayers for Common Sense in Washington. ''Those two individuals overseeing over a billion dollars in contracting -- it seems to me they may deserve a medal, but they shouldn't have had to do that,'' Mr. Ellis said.

While the new audit is a sometimes scathing look at landfills that were never dug, fiber-optic networks never completed and sewage treatment facilities that never worked as designed, there is also praise for the work Bechtel did complete, including the installation of two huge electrical generators at the Baghdad South Power Plant and the rehabilitation of a sewer system in the Zafaraniya section of the capital. ''It's actually quite positive, looking at it from a Bechtel perspective, in a lot of cases,'' said Bill Shoaf, program director for the company's Iraq infrastructure program. Although only 10 of the 24 job orders met their original objectives, Mr. Shoaf said, ''Conditions change and priorities change and customers want change.''

Bechtel was one of the first American contractors working in Iraq after the invasion, and it received an early reconstruction contract worth about $1 billion in April 2003. Later that year, Congress approved a much larger reconstruction program, worth $18.3 billion, to rebuild Iraq's water, sanitation, electrical, oil, transportation and telecommunications sectors. In January 2004, the company received a contract for $1.8 billion of the rebuilding project to carry out some of that work. But by April of 2004, the main Iraq insurgency had broken out, greatly complicating reconstruction efforts. And at the same time, American government agencies overseeing the effort struggled to fill staff positions. The aid agency filled only 170 of 251 authorized positions in Iraq, the inspector general's report says, while the Army Corps filled just 18 of 37 positions it had created to support the agency in the country.

Adding further turmoil to the program was the decision by the United States to shift billions of dollars from reconstruction to arming and training Iraqi security forces, causing dozens of projects to be cut back or canceled. Even on the projects that survived, contractors like Bechtel subcontracted much of the work to companies that in turn subcontracted parts of the work to other companies, and so on, making oversight of progress in a dangerous, war-torn country nightmarish at times.

The inspector general's report is careful to point out that even under these conditions, Bechtel was successful on a number of projects, and a few -- including a $22 million water plant -- actually came in at under the expected cost. ''In other instances, however,'' the report says, ''millions of dollars were spent and requirements were not met, reduced or clearly established.'' Among the work that failed was a huge project to add desperately needed electrical output to the Musayyib power plant, south of Baghdad. Originally budgeted at $23 million, the project ran into problems with American subcontractors, the Iraqi Electricity Ministry and deteriorating local security. Finally, only $6.6 million was paid out before the project ended, and even then, the report says, there is no clear indication of whether anything actually improved at the plant. ''Thus, it is difficult to establish the value of the product received for the $6.6 million cost of this job order,'' the report says.

Perhaps even more telling was a Baghdad landfill project originally budgeted at $14 million but never dug, even after $4 million had been spent on the project. Highly trumpeted by the American authorities in Iraq, the project was to be something entirely new for a country never known for the quality of its sanitation facilities. The report says in dry language that the project was canceled after three sites were considered and rejected ''because of land ownership issues and security concerns.''

Mr. Shoaf, of Bechtel, said the history of the project was considerably more colorful. The first site considered was near Abu Ghraib, an area that turned out to be a cauldron of insurgent activity, in addition to containing a notorious prison. The site also happened to be riddled with unexploded military ordnance and was abandoned, Mr. Shoaf said. Work began on a second site on the outskirts of Baghdad, but the local Iraqi governing council ordered that the landfill be moved elsewhere, he said. Finally, the project turned to a third Baghdad site where, as it happened, the water table was too high for a landfill to be excavated. So, Mr. Shoaf said, the project was dropped and the equipment that had been purchased was turned over to the Iraqi government. By that time, according to the inspector general's report, $4 million had been spent.

Army Major Faces Bribery Charges

An Army major is facing federal charges that in 2005 he accepted millions of dollars in bribes from contractors doing business with the Pentagon in Iraq and Kuwait. The Justice Department said yesterday that the major, John Cockerham, 41, of San Antonio, either awarded or controlled the contracts. He has been charged with bribery, money laundering and conspiracy. He and his wife, Melissa, were charged Sunday. His sister Carolyn Blake, 44, of Sunnyvale, Tex., was charged Tuesday. His wife and his sister were charged with conspiracy.

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