Desert Storm

In the maelstrom of insurgent attacks, revelations of prisoner abuse, allegations of contracting impropriety and growing frustration in the United States and on the scene, the occupation, reconstruction and transfer of sovereignty in Iraq appear to be spinning out of control. Mistreatment of detainees at Abu Ghraib prison has called into question the management of military detention centers around the world. The scandal has shaken the Pentagon. The possibility of contractor involvement in the misconduct amplifies worries that the companies supporting troops, acting as armed security forces and rebuilding infrastructure are too loosely supervised and too deeply involved in work that should be reserved for U.S. government officials.

It's becoming clear, however, that the U.S. government has neither enough staff nor enough experience to conduct the occupation or rebuilding of Iraq without unprecedented levels of contractor involvement. The overstretched Army can't spare soldiers to cook, clean or maintain bases; it is short-staffed in almost every job, including interrogator and translator. The Coalition Provisional Authority has hired contractors to develop requirements for and oversee construction work performed by other contractors.

In this confusing environment, soldiers and government employees in Iraq are having problems understanding who is in charge. Members of Congress and the American public are similarly confused.

For example, the Congressional Research Service proposed in April a startling idea with potentially far-reaching implications: "It is unclear whether CPA is a federal agency."

The report's author, L. Elaine Halchin, an analyst in CRS' American National Government and Finance Division, cites numerous administration statements, passages from law and findings by the General Accounting Office that all suggest CPA is not a U.S. government agency. Because of this ambiguous status, Halchin writes, "Lines of authority and accountability could become tangled, or even obscured. . . . Oversight of initiatives might be met with the response that the activity in question was carried out under an authority over which the oversight body-Congress-has no jurisdiction."

CPA's origins are murky. There's evidence to suggest it was created by presidential order or under the auspices of a U.N. Security Council Resolution. Because of this confusion, and since CPA makes up its own rules and regulations through official memoranda, "CPA personnel [detailed from more than 30 federal agencies and departments] possibly could find it difficult to understand and delineate clearly-on a daily basis-the organization's different roles and associated funds, laws and rules," Halchin writes.

The status of CPA is of concern to lawmakers and federal officials because it spends or directs the spending of billions of dollars allotted to rebuilding Iraq. Most of that money comes from the U.S. government. If CPA is a federal agency, it must follow standard spending rules and procedures, such as the Federal Acquisition Regulation, and its contract awards could be reviewed by GAO and opened to public scrutiny.

It appears that CPA taps two major funding sources for reconstruction projects. CPA directly awards contracts using the Development Fund for Iraq, a multinational pool that consists of foreign donations and assets seized from the Saddam Hussein regime. CPA chief L. Paul Bremer controls the disposition of those funds and works with officials from a number of government agencies and coalition partners, such as the U.S. Agency for International Development, the Iraqi Ministry of Finance, the United Kingdom and Australia to decide what to spend. CPA also has authority over the $18.6 billion package Congress approved in October for rebuilding Iraq. While Congress gave CPA authority to spend that money-along with the State and Defense departments and other federal agencies-the occupation authority appears to direct contracts, while other agencies, mostly in the Defense Department, award them on CPA's behalf.

CPA's Program Management Office oversees that process and is managing more than $8 billion in reconstruction work thus far awarded. According to a list of projects on the office's Web site, several federal agencies have awarded contracts "through the direction" of the PMO. For example, AID and the Army Corps of Engineers award reconstruction contracts, while the Program Management Office "manages the [funds] appropriated by the U.S. Congress to support the reconstruction of Iraqi infrastructure."

The Army also has solicited goods and services on behalf of CPA. Halchin notes that contracts have been let for CPA by the Army's Communications-Electronics Command, which manages technology contracts, and the Naval Facilities Engineering Command. Halchin suggested that one reason CPA is limited to monitoring, rather than awarding, contracts may be that "government officials ascertained the authority does not have enough personnel, or enough personnel with sufficient experience in the types of work to be done in Iraq."

The Program Management Office's ability to manage contracts came under scrutiny after it awarded seven contracts in March to supervise and manage the work of 10 other contractors doing infrastructure construction work, such as rebuilding Iraq's electrical grid, public works, water system and the like. In a May 18 letter to Defense Secretary Donald Rumsfeld, four Democratic Congress members said CPA was "outsourcing the oversight of these contracts" and "it is not appropriate for contractors to exercise these functions." Sens. Ron Wyden, D-Ore., and Byron Dorgan, D-N.D., and Reps. Henry Waxman, D-Calif., and John Dingell, D-Mich., pledged to introduce legislation requiring the oversight contracts be terminated.

A report prepared for the four legislators, "Contractors Overseeing Contractors," notes that each of the 10 open-ended construction contracts was awarded to a single company, thus precluding competition for task orders. The contracts cover the companies' costs of doing business and provide award fees for performance. The absence of competition for task orders combined with the cost-plus nature of the pacts "places the burden of protecting the interests of the taxpayers on the officials overseeing the contracts," according to the report. But, the report notes, that burden itself was contracted. The report goes on to note that two of the oversight contracts were awarded to companies-Parsons, CH2M Hill and Parsons-Brinkerhoff-that have business partnerships with companies they are supposed to supervise.

Protest-Proof

But GAO appeared to put CPA on notice, saying it could address the status question if a company protested an award "conducted on the CPA's behalf by an entity that is a federal agency (such as the Department of the Army)." Such an award likely would involve U.S. funds, and an affirmative ruling on agency status could open CPA up to further protests.

As long as CPA is effectively protest-proof, companies contemplating work in Iraq face big risks, says Angela Styles, former administrator of the Office of Federal Procurement Policy. In "Seller Beware," a January article in Federal Contracts, Styles emphasized, "There are no rules in place for contracting by the CPA with U.S. appropriated funds."

The question of CPA's status won't be moot after the June 30 handover of sovereignty to Iraqis. The United States will have advisers in all government ministries for the foreseeable future. And, as Halchin points out, CPA has said it's not going away. "This issue [of who the Program Management Office will report to after June 30] is being studied now," CPA announced at a January conference on reconstruction contracts. "Regardless of who the [office] will report to after 30 June 2004, [it] will still be responsible for managing the Iraqi infrastructure reconstruction activities under these contracts."