Stop the Blank Checks to Iraq Contractors - TheStreet

Stop the Blank Checks to Iraq Contractors

While the U.S. sends billions to unsupervised firms, our domestic interests get shafted.
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Why can't we have greater accountability for money spent in Iraq?A new report -- Windfalls of War II -- released by the Center for Public Integrity shines a bright light on a crucial topic: government spending in Iraq.

The report offers disturbing revelations. We spend billions on contracts that fail to enforce incentives or cost savings. Contracts go to foreign sources whose identities remain unknown, with little or no oversight to monitor the morass. If the Bush administration is serious about financial discipline, then maybe it should start looking at the reckless spending in Iraq.

The report follows up on its investigation into spending from 2001 to 2003 and focuses on 2004 to 2006. It found that American firms received substantial contracts. The leading American contractor will come as no surprise:

KBR

(KBR) - Get Report

. KBR, formerly known as Kellogg Brown and Root, used to be a subsidiary of

Halliburton

(HAL) - Get Report

.

KBR took in more than $16 billion in contracts between 2004 and 2006, which is more than nine times what private security firm DynCorp International pulled in at second place, according to the report. Other notable American firms winning contracts in the top 20 were:

L-3 Communications

(LLL) - Get Report

at No. 6,

Fluor

(FLR) - Get Report

at No. 7,

Perini

(PCR)

at No. 8,

TetraTech

(TTEK) - Get Report

at No. 13 and

Lockheed Martin

(LMT) - Get Report

at No. 18.

The U.S. government has made it extremely difficult to track contracts, many of which stem from problems in the Department of Defense. The report quotes David Walker, head of the Government Accountability Office:

"We have identified about 15 systemic, longstanding acquisition and contracting problems that exist within the Defense Department -- which is the single biggest contractor within the U.S. government -- that we are still not making enough progress on. I mean, this stuff isn't rocket science."

One of the study's findings proves particularly problematic. Of the top 100 contractors in Iraq, 45% of the money goes to foreign firms. Furthermore, the identities of those firms remain unknown -- they're merely listed as "foreign contractors." The contracts represent more than $20 billion in spending from 2004 to 2006. The report has placed requests for information through the Freedom of Information Act.

The U.S. government during that time has increased its outsourcing by more than 50% on an annual rate, from $11 billion in 2004 to almost $17 billion in 2005 and more than $25 billion in 2006. Unfortunately, oversight has actually decreased during this time period.

A recent source of oversight is Rep. Henry Waxman (D., Calif.), who leads the committee on

Oversight and Government reform. Waxman has had trouble getting information and has been stonewalled by the State Department. Waxman commented:

"If the government in Iraq is so corrupt that our State Department won't even tell us about it ... if it's so corrupt that it is undermining any chance of political progress, then how can we ask our brave men and women to risk their lives there? We are putting them in an impossible situation."

The House passed a resolution decrying the actions of the State Department in October by a wide margin: 395 to 21. It makes me wonder what the 21 dissenters are thinking.

The most discouraging thing about the contracts is that they fail to have cost savings and performance incentives. We need to know what we're getting.

One big example is the U.S. Embassy complex, which is built on the site of a former Saddam Hussein palace complex. Waxman's committee turned up documents showing not only that the project has gone over budget by at least $140 million, but also that the work has been incredibly shoddy.

If we can't keep track of the corruption, then maybe we should reconsider allocating money to Iraq. Certainly we have some domestic needs. One of my major concerns is servicing the $9 trillion debt that continues to grow. We could use that money to address important initiatives like funding for education and science, investing in our health care systems to lower costs for the future or providing incentives for renewable energy resources to reduce our reliance on foreign oil.

We're spending billions of dollars in Iraq. The Bush administration needs to improve accountability before we decide to continue writing blank checks there.