Iraq's Reconstruction a Boondoggle by Design

If you were to gather together the finest, most creative minds and ask them to come up with a plan to outsource the reconstruction of Iraq that would guarantee shoddy work, overcharges, unfinished projects and overt graft, they would probably devise a system very similar to what U.S. taxpayers have enjoyed -- to the tune of about $30 billion -- for the past three years.

In Baghdad, basics like electricity, sanitation and clean drinking water are at lower levels today than they were before the war. A poll last year found that after more than two years of work, only 30 percent of Iraqis had any idea that there was any kind of reconstruction effort at all.

The reconstruction of Iraq has become a boondoggle of historic proportions, but make no mistake: It's a boondoggle by design.

It's an elegant design that begins by shrinking the universe of possible contractors as far down as possible -- competition mercilessly drives firms to ever greater efficiency, and that won't do.

The administration first cut out those who didn't support the invasion. Paul Wolfowitz wrote that "limiting competition for prime contracts [to members of the 'Coalition of the Willing'] will encourage the expansion of international cooperation in Iraq and in future efforts." That knocked out around half of the world's largest construction firms.

But that's just the official policy. In reality, the contracting pool is much shallower. The business community in the United Kingdom -- a country that's taken about a thousand casualties in Iraq -- have been in a snit for two years about not getting their share. The biggest prime contract given to a British company was the $430 million security gig awarded to Aegis, and the top recipient overall was AMEC, mostly in subcontracts to Fluor, a Texas company with a terrible record in Iraq but close ties to the GOP. At less than a billion dollars total, AMEC's take doesn't crack the top 15.

The Center for Public Integrity (CPI) found that 60 percent of the top 70 firms getting reconstruction contracts in Iraq -- the New York Times called them "among the politically best-connected in Washington" -- had high-level employees or board members who came out of the military or the government. The group donated almost $50 million to PACs and candidates since 1990. Charles Lewis, then director of CPI, said that there's "a stench of political favoritism and cronyism surrounding the contracting process in both Iraq and Afghanistan."

How does a good Republican administration justify trashing the free market's competitive spirit when they spend so much time kowtowing to its wonders? They simply redefine "competition"; according to the Project on Government Oversight, a contract is considered "competitive" when "a few favored contractors" get a shot at it, or even when it's not bid out at all. There are government procurement rules that require open competition, but there are also plenty of loopholes.

USAID, one of the lead reconstruction agencies, used an exemption from the contracting rules to dole out its first eight big contracts secretly, finding that open bidding would impair the agency's "foreign assistance objectives."

Actually, it did follow standard procurement procedures -- it posted all the contract requirements and requested bids like they're supposed to. But, taking a page from "Catch-22," they only did it after the contracts were awarded. Steve Schooner, co-director of George Washington University's Government Procurement Law Program, told Congress: "Intentionally or unintentionally, USAID excluded any number of potentially qualified U.S. companies."

That gets to the heart of the most common defense of large, no-bid contracts: Only a handful of firms are capable of managing projects as large as those being handed out in Iraq. When Halliburton got busted for overcharging the Army $61 million for gas deliveries from Kuwait on a large no-bid contract, the company released a statement saying it was the "only one that met the Army Corps of Engineers' specifications."