Report details problems with contract for Iraq health centers

Poor government management and unsatisfactory contractor performance contributed to the derailment of a contract worth more than $240 million to build 150 health care centers in Iraq, government inspectors have found.

Little progress has been made on the contract since its award just over two years ago, despite expenditures of $186 million, about 77 percent of its full value, according to a report published Monday by the Special Inspector General for Iraq Reconstruction (SIGIR-06-011).

The contract was awarded to build 150 primary health care centers with medical and dental capabilities throughout Iraq. As of early March, only six had been completed. Eight projects had been canceled, one was moved to another contract vehicle, 14 were under construction, and 121 were partially constructed but terminated by government managers due to management and funding problems.

Inspectors cited numerous additional problems with fulfillment of the contract, awarded to Pasadena, Calif.-based engineering and construction firm Parsons Delaware, now Parsons Global Services, and managed jointly by the Army Corps of Engineers' Gulf Region Division-Project and Contracting Office, the Iraq Reconstruction Management Office and the Joint Contracting Command-Iraq/Afghanistan.

The IG acknowledged reports that myriad problems on the contractor side -- enumerated by the Corps of Engineers, as the inspector team was unable to gain physical access to most sites -- meant Parsons "would not or could not meet contract requirements." But inspectors took a hard line with the government's role in the project's failings, too.

"This report focuses on the government's contract administration because we believe that the Federal Acquisition Regulations, if properly followed, identify the responsibilities of each party in a contract, and provide sufficient contract controls to ensure that the government receives the goods or services it seeks at a fair and equitable price," the auditors wrote. They noted that contractor problems should not have resulted in extensive expenditure of program funding "with little to show for the effort."

Inspectors found that, despite the Joint Contracting Command issuing letters of concern to the contractor in June and July of last year and making efforts to increase contract oversight, management lapses since that time contributed to cost overruns and other problems.

Inspectors cited high turnover among government personnel as a problem, noting that eight different names were signed to contract modifications over the agreement's two-year life, and that at least six program managers were involved. Inspectors also found that directions were given without agreement from the contractor, resulting in failures to achieve cost and time goals that not all parties had accepted as reasonable.

Auditors found fault with program managers' responsiveness to contractor communications, cost and time reporting, contract administration and quality assurance as well.

Officials with the Joint Contracting Command and Army Corps of Engineers generally concurred with auditors' recommendations to improve contract management, including improving workforce training, establishing and monitoring reporting mechanisms, and validating cost-to-complete and schedule reports, while the Iraq Reconstruction Management Office denied authority over project management decisions.

Under revised contract terms, Parsons was to deliver a total of 20 health care centers, including the six already completed, by April 3, 2006. Erin Kuhlman, Parsons' vice president of corporate relations, said the company has completed those facilities, though it will not repair one that was badly damaged by an insurgent attack.

Kuhlman said Parsons performed its work in compliance with contract terms and direction from government managers. She said cutting back the scope of work "was necessary due a lack of funding and was mutually agreed between Parsons and the government."

Costs to complete the 121 partially constructed centers are estimated at $36 million. An Iraq Reconstruction Management official, unnamed in the report, was quoted as saying the Iraq Relief and Reconstruction Fund would not cover all of them, but inspectors said both the Iraqi and U.S. governments are committed to identifying additional funds and completing the project.