IRAQ. US construction giant Bechtel National arrived in Iraq in 2003, on the heels of US troops, with a fat contract awarded by the US Agency for International Development (USAID) to rebuild the country.
Then in 2004 the company won a second contract, worth a potential US$1.8 billion. Wearing white construction helmets labeled 'Bechtel', the company's construction supervisors oversaw work on hospitals, schools and bridges, and tried to get the water flowing and the electricity turned on.
A new federal audit released on Wednesday, however, found that a big chunk of Bechtel's reconstruction work for USAID, the federal agency that issued the contract, was never achieved on the second contract.
Auditors checked the 24 jobs Bechtel was supposed to complete.
"Ten did not achieve their original objectives," the auditors found. In another three projects, "we were either unable to determine what the original objectives were or the achievements were unclear."
The cost for unfinished efforts was high: the US government approved a total of US$180 million in payments for Bechtel’s ten allegedly unfinished projects. They include a US$24 million water treatment plant in Baghdad's impoverished Sadr City, a US$26 million children's hospital in Basra and a US$4 million Baghdad landfill that was never built
"The Bechtel audit is emblematic of the reconstruction problems in Iraq," said Stuart Bowen, Special Inspector General for Iraq Reconstruction, whose office conducted the audit.
Mark Tokala, an official at the US Embassy in Baghdad, characterised the audit's findings of unfinished projects as "a success rate of less than 42%."
USAID also was cited in the audit for its "limited" oversight of Bechtel's work. The audit said "USAID had only two people directly involved in the contract administration of the phase two contract: the administrative contracting officer and the cognizant technical officer."
In addition, USAID had little time to check Bechtel's invoices, the auditors said, since the agency "had agreed in its contract with Bechtel to review and pay Bechtel's vouchers within ten days of submittal."
Indeed, auditors found that in one case Bechtel was paid within two days of submitting a US$11 million voucher, giving USAID almost no time to check the bills that the company was submitting.
Another issue was that a large chunk of the federal funds didn't go to work directly on projects but on "support costs," like fees and security. The audit found that only 59% actually went to construction, with the rest paid to Bechtel for security and fees.
The Bechtel contract was called the 'Phase II Iraq Reconstruction Contract'. While it was supposed to have a ceiling of US$1.8 billion, it ended up less than that as jobs were cancelled and reassigned. The actual costs came to aboutUS $1.3 billion.
USAID disagreed with many of the findings in the report. Bechtel spokesman Jonathan Marshall told NBC News that "there is almost nothing in the audit that is critical of Bechtel's performance."
Marshall added that often when the original objectives were not achieved, that was because of decisions made by USAID, not Bechtel. "It is unfair to consider that a critique of Bechtel's work," he said.
Frederick Barton, who examines reconstruction for Center for Strategic and International Studies, a Washington, DC, think tank, said in a CBC interview that the government may not have been honestly appraising the chances for success from the beginning.
"It just sort of galls you," he said. "At the very least someone should have said, we are going to throw money at the problem and 50% may not get done. The US government pretended they would be able to complete these things, but someone must have known."