Watchdog: Projects in Iraq at risk for fraud, waste and abuse

The U.S. position in Iraq is ripe for fraud, waste and abuse, in part because of a heavy reliance on defense contractors despite poor visibility into their numbers and ineffective management, according to the top congressional auditor.

In January testimony before the House Appropriations Subcommittee on Defense, released this week in an unclassified form, Government Accountability Office chief David M. Walker told lawmakers that in the midst of a deteriorating security situation, the Defense Department is vulnerable to misspending.

"DoD's heavy reliance on contractors in Iraq, its long-standing contract and contract management problems, and poor security conditions provide opportunities for fraud, waste and abuse," Walker testified.

The government is vulnerable in part because Defense Department leaders do not have an accurate accounting of the number of people employed under U.S. contracts in Iraq. As an example, Walker cited a commander's estimate that the Army pays about $43 million per year for free meals provided to contractors who also receive per diem payments.

About a year ago the Army Central Command and the international forces in Iraq called for a census of contractors working in theater. But last October, the Defense Central Command gave up on compiling an accurate head count, citing difficulties in data collection.

Rep. Marty Meehan, D-Mass., chairman of the House Armed Services Subcommittee on Oversight and Investigations, said this week during a hearing on the use of contractors in Iraq that Defense had nearly 127,000 contractors at last count. A staff member said it was not clear whether that figure includes subcontractors.

In his report to lawmakers, Walker said Defense also lacks clear guidance on the use of support contractors. He said problems with defining contract requirements shift additional risk to the government, and that a dearth of contract oversight personnel prevents the department from ensuring that work stays on track.

Walker also cited training as a problem that "hinders the ability of military commanders to adequately plan for the use of contractor support and inhibits the ability of contract oversight personnel to manage and oversee contracts and contractors in Iraq."

On Thursday, the Office of Management and Budget announced a new certification for project and program managers that is designed to ensure they have the necessary skills to work with acquisition personnel in defining and managing contracts. But Defense is exempt on the grounds that the department already has a similar program in place.

Paul Denett, who leads OMB's procurement policy office, said in an interview that Defense officials would watch the new certification program closely for aspects that could be integrated into the department's approach. Denett said the Defense strategy is heavily tilted toward senior managers, who get extensive acquisition training through a dedicated academic program, while those at the more junior levels receive less instruction than is envisioned for civilian agencies.

In his testimony, Walker also said Congress cannot know the severity of the security situation in Iraq without better information about the preparedness of Iraqi troops.

Defense develops "transition readiness assessments" on Iraqi units' training progress. Walker said in January that he was close to reaching an agreement with Defense leadership on gaining access to those reports. But a GAO spokesman said Friday they have not been turned over.

Stuart Bowen, special inspector general for Iraq reconstruction, has said the reconstruction effort is prone to waste, but has not experienced much fraud since a crackdown in 2004.