Contracting problems cited for Iraq construction failures

Cost-plus contracts and undefined contract terms limit the government's ability to ensure delivery on Iraq reconstruction projects, witnesses told lawmakers at a hearing Thursday.

The House Government Reform Committee oversight hearing, convened by Rep. Tom Davis, R-Va., highlighted reports of cost overruns and construction failures in projects, including accounts of raw sewage dripping from ceilings in a police academy. It focused largely on work by Parsons Delaware Inc. to complete a police academy in Baghdad and a series of 150 public health clinics throughout the country.

Preliminary results of an investigation by the special inspector general for Iraq reconstruction (SIGIR-PA-078) found that plumbing leaks at the police academy could pose a health threat, limit the number of recruits that can be trained there and potentially render the building structurally unsound.

The newly completed buildings, which included cadet barracks, a library and laundry facilities, were built through a $75 million contract managed by the Army Corps of Engineers, with much of the work performed by local subcontractors. But laborers installed plumbing pipes without fittings to properly seal junctions, causing them to leak.

"Toilets are continually draining through the reinforced concrete floors, from the top floor to the second floor to the ground floor, permeating and filling light fixtures, showers and toilet areas with liquids, including diluted urine and fecal matter," the IG wrote in a "quick response report" on the barracks building.

Engineers expressed concern that the structural integrity of the concrete walls and ceilings could be compromised by deterioration of the reinforcing steel running through them, and by leaching of chemical salts that help make the concrete solid.

In their report, inspectors recommended that a survey be completed of the plumbing in all new academy buildings, including the eight barracks known to share the plumbing problems. Environmental and health hazards should be studied, and an assessment made of the load-carrying capacity of the concrete floor slabs, they said.

In addition to the problems at the academy, legislators heard reports on another Parsons contract for the construction of 150 public health clinics throughout Iraq, to be built for $243 million. Only six were completed -- 121 were partially completed and could be finished, and others were abandoned for various reasons including security and site problems, despite $186 million in spending.

The Army Corps of Engineers recently announced that the 121 partially completed clinics will be finished by local contractors for about $36 million.

SIGIR Inspector General Stuart Bowen testified that oversight of the reconstruction projects had failed at multiple levels.

He cited poor responses by government agencies to contractor requests for scope and design changes, high turnover of agency personnel, poor cost controls and reporting and quality assurance gaps. On the contractor side, investigators were told of shortages of qualified engineering staff, insufficient research to ensure that subcontractors were qualified and security problems.

Bowen defended cost-plus contracts, in which the government pays a contractor the full cost associated with a project plus specified overhead and award fees, as a crucial tool for completing projects in Iraq's high-risk environment. Legislators questioned whether they provided appropriate incentives to the contractor.

Katherine Schinasi, managing director of acquisition and sourcing management for the Government Accountability Office, said "design-build" contracts -- an arrangement frequently used in Iraq in which a single firm is responsible for both stages of a project -- require an agency to rely heavily on just one contractor.

The State Department's senior adviser for Iraq, David Saterfield, said in many cases agencies have moved forward on projects without finalizing terms and conditions of the contract, leaving contracting officers with an understanding that they have limited or no ability to recover costs when things go badly.

Earnest Robbins, a senior vice president with Parsons and manager of its international division, defended the company's work and said the Baghdad police academy buildings would be repaired at no additional cost to the government. "I think the taxpayer got what the contract called for," he told legislators, turning down demands that the company return its profits on the facility.

Robbins and Cliff Mumm, president of Bechtel Infrastructure Corp., responded to the criticisms with descriptions of the enormous security challenges presented by operating in Iraq.

Robbins said his company had lost no Americans but about "two dozen" Iraqi subcontractors through violence over the course of operating there. In describing the executions and kidnappings that have plagued Bechtel, Mumm said the company had suffered 101 casualties, including 51 deaths.

Asked how such contract failures could be avoided, Robbins said time and resource pressures on contractors contributed to the problem.