[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]




     ACQUISITION UNDER DURESS: RECONSTRUCTION CONTRACTING IN IRAQ

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 28, 2006

                               __________

                           Serial No. 109-192

                               __________

       Printed for the use of the Committee on Government Reform


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
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                     COMMITTEE ON GOVERNMENT REFORM

                     TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut       HENRY A. WAXMAN, California
DAN BURTON, Indiana                  TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
GIL GUTKNECHT, Minnesota             CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana              ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio           DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania    DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah                   WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee       DIANE E. WATSON, California
CANDICE S. MILLER, Michigan          STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio              CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California          LINDA T. SANCHEZ, California
JON C. PORTER, Nevada                C.A. DUTCH RUPPERSBERGER, Maryland
KENNY MARCHANT, Texas                BRIAN HIGGINS, New York
LYNN A. WESTMORELAND, Georgia        ELEANOR HOLMES NORTON, District of 
PATRICK T. McHENRY, North Carolina       Columbia
CHARLES W. DENT, Pennsylvania                    ------
VIRGINIA FOXX, North Carolina        BERNARD SANDERS, Vermont 
JEAN SCHMIDT, Ohio                       (Independent)
BRIAN P. BILBRAY, California

                      David Marin, Staff Director
                Lawrence Halloran, Deputy Staff Director
                         Benjamin Chance, Clerk
                         Michael Galindo, Clerk
          Phil Barnett, Minority Chief of Staff/Chief Counsel












                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on September 28, 2006...............................     1
Statement of:
    Robbins, Earnest O., II, senior vice president and manager, 
      international division, Parsons Infrastructure and 
      Technology Group; and Cliff Mumm, president, Bechtel 
      Infrastructure Corp........................................   146
        Mumm, Cliff..............................................   157
        Robbins, Earnest O., II,.................................   146
    Schinasi, Katherine, Managing Director, Acquisition and 
      Sourcing Management, U.S. Government Accountability Office; 
      Stuart W. Bowen, Jr., special inspector general for Iraq 
      reconstruction; Ambassador David Satterfield, Sr., Senior 
      Advisor on Iraq to the Secretary of State; James A. Bever, 
      Deputy Assistant Administrator for Asia and the Near East, 
      U.S. Agency for International Development; Tina Ballard, 
      Deputy Assistant Secretary of the Army (policy and 
      procurement); and J. Joseph Tyler, Acting Deputy Director 
      of Military Programs, U.S. Army Corps of Engineers.........    19
        Ballard, Tina............................................    74
        Bever, James A...........................................    68
        Bowen, Stuart W., Jr.,...................................    39
        Satterfield, Ambassador David, Sr........................    50
        Schinasi, Katherine......................................    19
        Tyler, J. Joseph.........................................    81
Letters, statements, etc., submitted for the record by:
    Ballard, Tina, Deputy Assistant Secretary of the Army (policy 
      and procurement), prepared statement of....................    75
    Bever, James A., Deputy Assistant Administrator for Asia and 
      the Near East, U.S. Agency for International Development, 
      prepared statement of......................................    70
    Bowen, Stuart W., Jr., special inspector general for Iraq 
      reconstruction, prepared statement of......................    41
    Cummings, Hon. Elijah E., a Representative in Congress from 
      the State of Maryland, prepared statement of...............   141
    Davis, Chairman Tom, a Representative in Congress from the 
      State of Virginia, prepared statement of...................     4
    Lantos, Hon. Tom, a Representative in Congress from the State 
      of California, prepared statement of.......................    13
    Lynch, Hon. Stephen F., a Representative in Congress from the 
      State of Massachusetts, prepared statement of..............   208
    Mumm, Cliff, president, Bechtel Infrastructure Corp., 
      prepared statement of......................................   159
    Porter, Hon. Jon C., a Representative in Congress from the 
      State of Nevada, prepared statement of.....................   207
    Robbins, Earnest O., II, senior vice president and manager, 
      international division, Parsons Infrastructure and 
      Technology Group, prepared statement of....................   149
    Satterfield, Ambassador David, Sr., prepared statement of....    52
    Schinasi, Katherine, Managing Director, Acquisition and 
      Sourcing Management, U.S. Government Accountability Office, 
      prepared statement of......................................    22
    Tyler, J. Joseph, Acting Deputy Director of Military 
      Programs, U.S. Army Corps of Engineers, prepared statement 
      of.........................................................    83
    Van Hollen, Hon. Chris, a Representative in Congress from the 
      State of Maryland, information concerning multiple layers 
      of security subcontracts...................................   100
    Waxman, Hon. Henry A., a Representative in Congress from the 
      State of California:
        Letter dated September 18, 2006..........................   187
        Prepared statement of....................................     8













 
      ACQUISITION UNDER DURESS: RECONSTRUCTION CONTRACTING IN IRAQ

                              ----------                              


                      THURSDAY, SEPTEMBER 28, 2006

                          House of Representatives,
                            Committee on Government Reform,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10 a.m., in room 
2154, Rayburn House Office Building, Hon. Tom Davis (chairman 
of the committee) presiding.
    Present: Representatives Tom Davis, Clay, Cummings, Dent, 
Duncan, Foxx, Gutknecht, Kucinich, Lantos, Maloney, McHugh, 
Norton, Porter, Shays, Van Hollen, Watson, and Waxman.
    Staff present: David Marin, staff director; Larry Halloran, 
deputy staff director; Keith Ausbrook, chief counsel; Ellen 
Brown, legislative director and senior policy counsel; Mason 
Alinger, deputy legislative director; Patrick Lyden, 
parliamentarian; Edward Kidd, professional staff member; John 
Brosnan, procurement counsel; Paul Sherry, detailee; Benjamin 
Chance, clerk; Phil Barnett, minority staff director/chief 
counsel; Karen Lightfoot, minority communications director/
senior policy advisor; Jeff Baran and Margaret Daum, minority 
counsels; David Rapallo, minority chief investigative counsel; 
Shaun Garrison, minority professional staff member; Earley 
Green, minority chief clerk; and Jean Gosa, minority assistant 
clerk.
    Chairman Tom Davis. The committee will come to order.
    Good morning, we meet today to look into the challenges 
surrounding the daunting task of coordinating and executing 
contracts to rebuild long-neglected critical infrastructure in 
war-torn Iraq. Since 2004, the committee has been engaged in 
continuous and vigorous oversight of contracting activities in 
Iraq. The oversight has involved four hearings on the 
challenges of contracting in a war zone, numerous briefings 
from the agencies involved in the contracting efforts, as well 
as a review of thousands of documents the committee obtained 
from key Federal agencies.
    Those efforts focused primarily on contracts for logistical 
support of U.S. military operations. In this hearing, we will 
examine the process, the progress and the problems of 
reconstruction contracting activities in Iraq.
    Since the beginning, it has been our goal to move beyond 
the polarized politics that swirl around any topic related to 
the war in Iraq and conduct thorough, balanced oversight of 
acquisition activities there. Some have not shared that goal, 
choosing instead to play hit and run oversight with 
inflammatory press releases and one-sided presentations from 
self-appointed watchdogs and whistleblowers. I think they 
oversimplified the story and pre-judged the outcome of complex 
contracting processes to fit the preordained conclusion that 
everything goes wrong in Iraq. And they will never let it go 
without saying it is all Halliburton's fault.
    I hope this hearing will be different. We will hear from 
the administration, from two of the most active oversight 
offices, and from participating contracting firms. I know that 
means we have a larger number of witnesses and that this 
hearing will take some time to complete. But real oversight, 
responsible oversight is as much a matter of due diligence as 
startling disclosures. It should be about sustaining good 
government, not the quick ``gotcha.''
    The picture painted by our witnesses today will not be 
pretty, nor will their testimony necessarily tell the complete 
story of an evolving, dynamic, sometimes dangerous process. But 
this much is clear: poor security, an arcane, ill-suited 
management structure, and a dizzying cascade of setbacks have 
produced a succession of troubled acquisitions.
    The construction of a children's hospital in Basrah is 
almost a full year behind schedule and more than $50 million 
over budget. A project for the construction of 150 primary 
health care centers across Iraq has consumed over $180 million 
but has resulted in the completion of only six centers At best, 
the Iraqis will end up with only 20 of the health facilities 
planned under this contract. Other troubled projects include a 
$218 million emergency communications network that does not 
allow citizens to call for emergency services and multiple 
water projects that are chronically over budget and behind 
schedule.
    Just this morning, we learned the details of yet another 
critical reconstruction project gone terribly wrong, a $75 
million police academy that has been so poorly constructed that 
it poses health risks to its occupants and may need to be 
partially demolished.
    Obviously, security is the critical factor driving cost and 
confounding contract management and oversight. On a daily 
basis, our military, civilians and contractors come under 
hostile fire. A number of contractor employees have been killed 
or wounded. It is a major understatement to say Iraq is a tough 
place to conduct business. Travel can be difficult or 
impossible. So it is no surprise that normal acquisition 
support and oversight resources are stretched to the breaking 
point.
    But a challenging security environment cannot excuse 
otherwise avoidable problems and preventable waste. Original 
plans proved wildly optimistic. Only about 55 percent of the 
planned water projects and about 70 percent of the planned 
projects in the electricity sector have been completed. 
According to the Special Inspector General for Iraq 
Reconstruction, we keep spending more and building less because 
cost estimates are still inaccurate, reconstruction priorities 
and funding allocations keep shifting, and contractor 
performance is not being closely monitored.
    So we need to learn how contracting systems designed to 
work here are being adapted to function under very different, 
hostile circumstances over there. We have to ask whether 
contractors have over-promised and under-performed or whether 
the companies were stuck in an environment where success was 
virtually impossible. But things have been built, and some of 
our witnesses today will testify that, despite many challenges, 
we are progressing, slowly but surely. In fact, the Special 
Inspector General points out that his onsite assessments show 
that about 80 percent of the projects inspected have met 
contract specifications.
    Many of our witnesses have spent considerable time working 
in Iraq, and we value their experience and their perspective on 
the important issues raised by reconstruction contracts there. 
Much is at stake, in terms of U.S. tax dollars and in terms of 
effectively helping the Iraq people rebuild the basic 
infrastructure of their nation. We look forward to their 
testimony and to a frank, constructive discussion.
    I now recognize our distinguished ranking member, Mr. 
Waxman, for his opening statement.
    [The prepared statement of Chairman Tom Davis follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    
    Mr. Waxman. Thank you, Mr. Chairman, for holding this 
hearing. It is critical as part of our constitutional oversight 
responsibilities to have the Government agencies and private 
contractors involved in Iraq reconstruction work come before 
our committee to explain how U.S. taxpayer dollars are being 
spent.
    This is the first full committee hearing on Iraq during 
this Congress. I wish we didn't have to wait until the last 
week of the session for it, but I am glad the chairman has 
called it.
    I think most Americans understand that the reconstruction 
effort is failing. Today, we have a new symbol of the Bush 
administration's failure: the dilapidated and disgusting 
facilities at the Baghdad Police College, which the Army and 
the Parsons Co. spent $75 million to build.
    A report today from Stuart Bowen, the Special Inspector 
General for Iraq Reconstruction, describes how the contractor's 
work and the administration's oversight were so grossly 
deficient that urine and fecal matter were literally raining 
down on Iraqi police recruits.
    Let me read some of the direct quotes from the report: 
``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 urine was so pervasive that it had permanently 
stained the ceiling tiles.''
    Auditors ``witnessed a light fixture so full of diluted 
urine and feces that it would not operate.''
    ``The amount of material was so pervasive that it has 
soaked through the reinforced concrete floors, causing 
deterioration of the reinforced steel.''
    This debacle is not just a waste of taxpayer funds, and it 
doesn't just impact the reconstruction. It impedes the entire 
effort in Iraq. Not only will the number of basic recruits 
graduating through the facility be impacted, but more than 
that, this is the lens through which the Iraqis will now see 
America, incompetence, profiteering, arrogance, and human waste 
oozing out of ceilings as a result.
    A new and disturbing poll found that 60 percent of Iraqis 
actually approve of attacks against U.S. forces and want us out 
of their country. Can there be any more obvious indication of 
failure?
    By no means, however, is this the only example. The 
administration has spent over $30 billion in taxpayer funds and 
another $20 billion in Iraqi funds under its control, yet it 
has produced little of lasting value.
    In the oil sector, the administration has spent over $2 
billion. As of July, however, they were producing only 2.5 
million barrels per day, still below prewar levels.
    In the electricity sector, the administration has spent $4 
billion. Yet electricity generation in August was just 4,900 
megawatts, well below the administration's goal of 6,000 
megawatts.
    In the health sector, Bechtel was removed from the contract 
to rebuild the Basrah Children's Hospital because of massive 
cost overruns and schedule delays. And the Parsons Co., the 
same company in charge of the horrible Baghdad Police College, 
was terminated after it finished only 6 of the 142 health 
clinics it was scheduled to build.
    At the same time, the American taxpayer is facing record 
overcharges. Just this week, the nonpartisan Government 
Accountability Office, which is also here today, issued a 
report documenting that the Pentagon's own auditors have now 
identified an enormous sum, $3.5 billion, in questioned and 
unsupported charges under Iraq reconstruction contracts.
    That amount, $3.5 billion, is what we spent on the entire 
reconstruction of Afghanistan. When we break down this amount, 
it averages $2.7 million in overcharges each day we have been 
in Iraq. That is amazing.
    While there may be many reasons for this failure, there is 
no sense mincing words about the primary reason: the utter 
incompetence of this administration and its stubborn refusal to 
heed the warnings and advice of experts.
    Last week, the Baghdad bureau chief for the Washington Post 
published a book documenting overt cronyism in hiring for key 
positions at the Coalition Provisional Authority, which is the 
governing body of the Bush administration created to run Iraq. 
The claims in this book were not made by anonymous, disgruntled 
employees. They were made on the record for attribution by some 
of the highest ranking officials at the CPA.
    One of the most noteworthy is Frederick Smith. He was the 
Deputy Director of the CPA in Washington. He revealed that the 
criterion for sending people to Iraq was that they had the 
right political credentials, not their substantive expertise. 
He said the ideal candidate, from the administration's 
perspective, was not someone who spoke Arabic or had a 
development background, but someone who worked on the 
Republican side of the Florida recount in 2000. According to 
Mr. Smith, we ``just didn't tap the right people to do this 
job. I just don't think we sent our A-team.''
    But the fact remains that incompetence results in failure. 
And in this case, incompetent decisionmaking at the highest 
levels of the CPA undermined the reconstruction, squandered 
billions of taxpayer dollars, endangered our troops, and 
contributed to the massive discontent and violence occurring in 
Iraq.
    The recent revelations in the declassified National 
Intelligence Estimate underscore this assessment. The 
Intelligence Estimate says the jihadists ``are increasing in 
both number and geographic dispersion,'' and that ``if this 
trend continues, threats to U.S. interests at home and abroad 
will become more diverse, leading to increasing attacks 
worldwide.''
    Those are sobering words, and they are not used by 
accident. The intelligence community explicitly warns that 
there is a trend, and this trend is getting worse. The 
President is wrong when he says his strategy is winning the war 
on terror.
    We have to face reality. Staying the course is 
strengthening our enemies and putting our security in jeopardy. 
The administration's entire Iraq policy is a failure. For the 
safety of our troops, for the sake of the taxpayer, and for our 
own security, the Nation urgently needs a fundamentally new 
direction.
    Thank you, Mr. Chairman.
    [The prepared statement of Hon. Henry A. Waxman follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    
    Chairman Tom Davis. Thank you, Mr. Waxman.
    Do any Members wish to make opening statements? Mr. Lantos. 
Mr. Duncan. I am sorry, and then Mr. Lantos.
    Mr. Duncan. Thank you very much, Mr. Chairman. This is an 
important hearing and I understand it is the seventh hearing 
that this committee has held about Iraq. I have seen two recent 
articles, one from a couple of days ago which says a review of 
Iraq reconstruction funding revealed the 96 contracts worth 
$362 million were obligated for payment to dummy vendors, as 
opposed to legitimate suppliers. I think we need to know about 
that.
    I have followed the Congress closely for more than 40 
years, and I have never heard of anything such as that. I am 
pleased that Mr. Bowen is here to hopefully explain that to us, 
and what happened to that money.
    Then last month, the Wall Street Journal had an article 
that said the corruption that has plagued Iraq's 
reconstruction, described by U.S. officials as a second 
insurgency, is worsening, complicating American reconstruction 
efforts and shattering public confidence in the Baghdad 
government, according to a new report by a Bush administration 
watch-dog agency. That also is for Mr. Bowen, but it said that 
in his quarterly audit, the Iraqi government estimates the 
corruption costs the country at least $4 billion a year, a 
staggering sum for a war-ravaged country that remains heavily 
dependent on foreign aid.
    It sounds as though much of this corruption is by the Iraqi 
people themselves. As I drove in this morning, I heard on the 
all-news WTOP Station, they were having people call in about a 
recent poll that said 75 percent of the Iraqi people want us to 
leave Iraq. I know that people at the top of the Iraqi 
government want us to stay because this is a country that just 
before the war started, Newsweek magazine said had a gross 
domestic product of $65 billion total for the year before the 
war. So obviously they want our money. I saw in one of the 
congressional publications yesterday that we have now spent 
$463 billion since the start in both Iraq and Afghanistan, 
mostly in Iraq.
    But we need to ask questions about these dummy contractors 
and about this corruption in Iraq. And also, I guess the key 
question here is, how much of these problems were caused by the 
contractors, but how much was caused by Iraqi corruption 
itself; and also by mismanagement by the military; also by 
military change orders; also how much was caused by just the 
war and the fighting itself.
    So I think this is a very important hearing. I think the 
conservative Republicans have traditionally been the ones most 
concerned about waste, fraud and abuse within our Government. I 
am pleased that you would call this hearing and continue this 
series.
    Thank you very much.
    Chairman Tom Davis. Thank you, Mr. Duncan.
    Mr. Lantos.
    Mr. Lantos. Thank you very much, Mr. Chairman.
    You and my friend, Mr. Waxman, have raised many of the 
specific issues that concern all of us. I would like to take a 
different tack. But first let me commend Mr. Bowen for the 
invaluable work you have done on behalf of the American people. 
If it were not for your inspector general's reports, we would 
not know a fraction of this very unsavory picture.
    As I was doing all my reading in preparation for this 
hearing, two images kept coming back in my mind, both of them I 
wish I would not remember. Some 15 years ago, I chaired the 
Housing Subcommittee of this committee, and we had, I believe, 
27 nationally televised hearings on waste and corruption and 
abuse and cronyism in the Department of Housing and Urban 
Development. It is the single most unpleasant episode of my 
congressional career and it revealed a series of appalling 
actions by high-ranking officials of the Department of Housing 
and Urban Development some 15 years ago.
    Many years ago, during the Soviet period, the Russians 
produced some propaganda films taking little vignettes of the 
seamy side of American society, put them together, and 
presented them as accurately reflecting what the United States 
is. And not until the Hurricane Katrina nightmare, where we saw 
the seamy side and the incompetence of our society, did we have 
anything comparable to that, and we provided, through our news 
clips during the hurricane, devastating propaganda against the 
United States by the failure to prepare and by the failure to 
manage that crisis.
    This crisis is, in many ways, worse. It is worse because it 
is an insult to our soldiers and Marines who are performing 
their jobs magnificently, with over 2,700 having lost their 
lives, a vast number permanently injured. We don't know how 
many with long-term psychological repercussions. And it is an 
insult to the American taxpayer. One really doesn't know 
whether to call this a theater of the absurd, where billions of 
American taxpayers' dollars were wasted in an obscene fashion; 
or whether to call it a chamber of horrors.
    Now, I am fully aware, as I am sure every single member of 
this committee is, having visited Iraq, that it is a very 
difficult place to function in an orderly and normal fashion. 
We all understand the physical dangers, the unpredictability of 
the surrounding situation at any moment. But this degree of 
irresponsibility, incompetence, failure to engage in 
supervision and proper management practices boggles the mind. 
When our leaders at the highest levels say we want to stand up 
the Iraqi police and here we have this awful report about the 
police academy; when we hear about the need to improve health 
care, and 6 of 150 planned health care facilities are 
completed, one is speechless. It boggles the mind.
    So Mr. Chairman, let me just say this hearing is long 
overdue. I am very pleased we are holding it. I am very pleased 
that we have, among other distinguished witnesses, the 
Inspector General, because I don't want to embarrass you with 
extreme praise, but you have done an outstanding job in 
documenting this chamber of horrors which confronts us.
    Thank you, Mr. Chairman.
    [The prepared statement of Hon. Tom Lantos follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    
    Chairman Tom Davis. Thank you very much.
    Mr. Gutknecht.
    Mr. Gutknecht. Just real briefly, Mr. Chairman. I won't 
give a political speech at all, but I just want to make it 
clear that part of the reason that we have as many inspectors 
general on this task is because we insisted, some of the 
conservative Republicans insisted that if we are going to be 
spending this much money, we want to make sure.
    Mr. Lantos. Mr. Chairman, a point of personal privilege. 
Did my colleague refer to me as he referred to a political 
speech?
    Mr. Gutknecht. No. I said I am not going to give a 
political speech.
    Mr. Lantos. Was that a reference to my earlier comments?
    Chairman Tom Davis. No, he made no reference to that.
    Mr. Lantos. I appreciate that.
    Mr. Gutknecht. But the point really is, this is not a 
partisan issue. I think people on all sides of the political 
aisle want to make sure that when we are spending taxpayer 
dollars, that they are not wasted. And so, I share some of the 
outrage of all of my colleagues on all sides of the aisle.
    The point I wanted to make is that the reason we have as 
many inspectors general poring over these, and the reason we 
have had seven hearings on these kinds of issues is because on 
both sides of the aisle, we think this is outrageous, and we 
want to get to the bottom of this. But most importantly, we 
want to put in place the accountability standards so this kind 
of thing stops. That is the key to this whole discussion today.
    I yield back the balance of my time.
    Chairman Tom Davis. Thank you very much.
    Let me just note, we have held several subcommittee 
hearings on contracts in Iraq, and we have been waiting to get 
these reports together and working together on this. But this 
is important and I appreciate the Member's interest in this.
    Mr. Van Hollen.
    Mr. Van Hollen. Thank you, Mr. Chairman. Thank you for 
holding these hearings. I am looking forward to the testimony 
of the witnesses.
    This is a question of competence or lack of competence, and 
the lack of accountability. You can look at the situation in 
Iraq today and clearly see that it is a mess. Despite the fact 
that the administration continues to tell us, just trust us, we 
know what you are doing. We need to go back and listen to what 
they told us before, and we remember when the President stood 
on the aircraft carrier, the USS Lincoln, back in May 2003, 
more than 3 years ago, under the banner, ``Mission 
Accomplished.''
    And we know more than a year ago that Vice President Cheney 
went on national television and said, ``The insurgency is in 
its last throes.''
    Those are statements made by the two top political leaders 
in our country. And yet we now know from a report that was 
released by the Pentagon just earlier this month that the 
situation in Iraq is dire, and that it is getting worse. That 
was a Pentagon report required by the U.S. Congress.
    We now have an NIE just released that says that it is the 
consensus of all 16 U.S. intelligence agencies that Iraq 
continues to be a magnet for jihadists and the terrorist 
movement, has inspired terrorists around the world and has been 
a breeding ground for extremists.
    So we need to have hearings on accountability and figure 
out how we got into this mess. In my own view, there were two 
wrong decisions. One was the initial decision based on what 
turned out to be false information. But the second part, and 
this is part of the exploration of the hearing today, is the 
post-invasion period, and the lack of planning for the post-
invasion period.
    The fact of the matter is, especially over at the Defense 
Department, which was given the main responsibility in the 
immediate aftermath of the war for reconstruction, you had an 
attitude started by the Secretary of Defense that this was 
going to be quick and easy, and we were going to be out of 
there. We don't have to plan. Back on September 9th, a story in 
the Washington Post headline, ``Rumsfeld Forbade Planning for 
Post-War Iraq, General says.'' Brigadier General Mark Shea told 
the paper in an interview that Rumsfeld had said, ``He would 
fire the next person who talked about the need for a post-war 
plan. The Secretary of Defense continued to push on us that 
everything we write in our plan has to be with the idea that we 
are going to be in, we are going to take out the regime, and we 
are going to be out of there, that we won't stay.''
    That is the mentality that infected the Defense Department 
planning when it came to these decisions. And so when it turned 
out we had to be there longer, we had to go into 
reconstruction, look what happened? Look what happened? Mr. 
Waxman has talked about the political cronyism that seeped into 
the decisionmaking.
    We remember more than a year ago with Hurricane Katrina, 
people in the southern States got hit twice. They got hit first 
by the hurricane, and then they got hit by the incompetence of 
a FEMA that was headed by someone whose main credentials was 
that he had been the head of the Arabian Horse Breeders 
Association. They got hit twice, hurricane and incompetence.
    And now we learn that on the major national security 
priority of our country, that same kind of mentality applied. I 
am just going to quote the headline from the article that Mr. 
Waxman referred to, ``Ties to GOP Trumped Know-How Among Staff 
Sent to Build Iraq.'' You would think that what mattered most 
was expertise with respect to Iraq; expertise with respect to 
reconstruction; maybe people who knew the language; people who 
knew what they were doing. But according to this article, in 
order to pass muster with O'Beirne, who was a political 
appointee at the Defense Department who screened prospective 
political appointees for Defense Department posts, applicants 
didn't need to be experts in the Middle East or in post-
conflict reconstruction. What seemed most important was loyalty 
to the Bush administration.
    So yes, I think that both sides of the aisle should be 
outraged with the incompetence, but both sides of the aisle 
also need to begin to hold people accountable for the decisions 
that have been made. Mr. Waxman quoted the No. 2 guy in charge 
of reconstruction saying that as a result of this political 
cronyism, we didn't get the best people for the job. And now we 
are here, many years later, wondering how things have gone so 
wrong in Iraq.
    I think the story sort of tells itself. It is an 
unfortunate story. We need to do our best to begin to restore 
confidence of the American people in what we are doing in Iraq, 
but we have a lot of walking back to do in order to do that.
    Thank you, Mr. Chairman.
    Chairman Tom Davis. Do any other Members wish to give an 
opening statement?
    Mr. McHugh. Mr. Chairman.
    Chairman Tom Davis. Mr. McHugh.
    Mr. McHugh. I am not going to make a statement, Mr. 
Chairman, but I just would like to hear the witnesses. It might 
be interesting. We are all interested in oversight. They may be 
helpful in that regard.
    Just a sentence that follows the issue about being in Iraq. 
It says in the NIE, ``Should jihadists leaving Iraq perceive 
themselves and be perceived to have failed, we judge fewer 
fighters will be inspired to carry on the fight.'' In other 
words, if we win, they lose.
    I think if we are going to quote a 34-page paper, we ought 
to pull out more than just one sentence. This is too important 
an issue to distill it down like a Readers Digest.
    I yield back.
    Chairman Tom Davis. Thank you.
    Mr. Kucinich.
    Mr. Kucinich. I would agree with my colleague that an in-
depth approach is called for in a review of what has happened, 
where we are at, and where we are going. I think it is 
important to look at the type of thinking that took us into 
Iraq. There is a book out by Corn and Isakoff called Hubris, 
and page 200 has a quote that I think is instructive for 
purposes of this hearing. It says, ``Post-war Iraq planning 
paralleled what happened with pre-war Iraq intelligence. The 
work of Government experts and analysts was discarded by senior 
Bush administration policymakers when it conflicted with or 
undermined their own hardened views about what to expect in 
Iraq.''
    So if we have a condition where there is a fundamental flaw 
in the world view of an administration, it harkens back to that 
biblical quote, ``That which was crooked cannot be made 
straight.'' Everything about what happened in Iraq, from the 
lies that led us into it about WMDs, trying to connect Iraq 
with September 11th, trying to connect Iraq with al Qaeda's 
role in September 11th, trying to say Iraq was an imminent 
threat. There is symmetry here with the collapse of 
reconstruction, because it is the same type of thinking.
    Today, we are here to discuss how the administration wasted 
billions of American and Iraqi taxpayer dollars. The goal is to 
find out where the money went and maybe ensure that the 
corruption does not continue. But we also need to ask the 
question: What are the effects of this failed reconstruction on 
Iraqi families? And then we need to ask: What are the combined 
effects of the first Gulf war, the economic sanctions 
throughout the 1990's, the 2003 shock-and-awe campaign, and its 
``collateral damage.''
    Abu Ghraib, and finally the failed reconstruction efforts, 
we know the administration has spent over $30 billion in 
taxpayer money to rebuild Iraq. The administration also spent 
an additional $20 billion in Iraqi funds under its control. Yet 
the administration has provided little relief for the suffering 
families in Iraq. We know Iraqis don't have adequate health 
care, schools, clean drinking water or roads. We know Iraqi 
children are suffering from diseases that do not threaten 
children in the developed world. We know that few Iraqis can 
claim they are better off now than they were when Saddam 
Hussein was in power.
    We know that the U.S. sanctions against Iraq were perhaps 
the toughest, most comprehensive sanctions in history, the 
sanctions crippled the Iraqi economy during the time they were 
imposed, forcing much of Iraq's infrastructure into disrepair. 
UNICEF has put the number of child deaths related to Iraqi 
sanctions at 500,000. The reasons include lack of medical 
supplies, malnutrition and especially disease owing to the lack 
of clean water. Among other things, chlorine needed for 
disinfecting water supplies was banned as having a dual use in 
potential weapons manufacture.
    For 1 minute, image yourself as an Iraqi mother or father. 
As any parent, your primary duty is to safeguard your family. 
But to do so, you have to overcome the effects of the first 
Gulf war, the economic sanctions through the 1990's, the 2003 
shock-and-awe campaign, and its, ``collateral damage,'' Abu 
Ghraib, and now the failed reconstruction efforts.
    Is it any wonder that the Iraqi people want the United 
States to leave? Is it any wonder that the Iraqi people are 
hostile to a U.S. soldier? Is it any wonder that the National 
Intelligence Estimate found that our invasion and continued 
presence in Iraq is creating a larger terrorist threat?
    We ought to refund back to the Iraqis the $9 billion in 
missing Iraqi money and we ought to pull out of Iraq as soon as 
possible as the Iraqis have made clear they desire.
    Thank you, Mr. Chairman.
    Chairman Tom Davis. Thank you, Mr. Kucinich.
    I think we are ready for our first panel now. Thank you for 
your patience. Members will have 7 days to submit opening 
statements for the record.
    On our first panel, Katherine Schinasi, who is the Managing 
Director of the Acquisition and Sourcing Management, Government 
Accountability Office. Thank you for being here.
    Stuart W. Bowen, the special inspector general for Iraqi 
construction. Thank you for being here.
    Ambassador David Satterfield, the Senior Advisor to the 
Secretary for Iraq, U.S. Department of State. Thank you, Mr. 
Ambassador.
    James Bever, Deputy Assistant Administrator for Iraq, 
Bureau for Asia and the Near East, U.S. Agency for 
International Development. Thank you for being here.
    Tina Ballard, no stranger to this committee, Deputy 
Assistant Secretary for Policy and Procurement, the U.S. Army. 
Thank you for being here.
    And Joseph Tyler, the Acting Deputy Director of Military 
Programs, U.S. Army Corps of Engineers. Thank you.
    As you know, it is our policy, we swear witnesses in before 
you testify, so if you would rise with me and raise your right 
hands.
    [Witnesses sworn.]
    Chairman Tom Davis. Thank you. Let the record show all 
replied in the affirmative. Your entire statements are in the 
record. I read them last night. Our questions will be based on 
that. If you would like to supplement that or capsulize it, we 
would like you to stay within 5 minutes so we can move on. You 
have a red light in front of you. When the red light is on 
after 5 minutes, your time is up. It will turn orange after 4 
minutes. It will green when you start.
    Ms. Schinasi, we will start with you. Thank you again for 
being with us.

     STATEMENTS OF KATHERINE SCHINASI, MANAGING DIRECTOR, 
     ACQUISITION AND SOURCING MANAGEMENT, U.S. GOVERNMENT 
ACCOUNTABILITY OFFICE; STUART W. BOWEN, JR., SPECIAL INSPECTOR 
GENERAL FOR IRAQ RECONSTRUCTION; AMBASSADOR DAVID SATTERFIELD, 
SR., SENIOR ADVISOR ON IRAQ TO THE SECRETARY OF STATE; JAMES A. 
  BEVER, DEPUTY ASSISTANT ADMINISTRATOR FOR ASIA AND THE NEAR 
EAST, U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT; TINA BALLARD, 
      DEPUTY ASSISTANT SECRETARY OF THE ARMY (POLICY AND 
 PROCUREMENT); AND J. JOSEPH TYLER, ACTING DEPUTY DIRECTOR OF 
        MILITARY PROGRAMS, U.S. ARMY CORPS OF ENGINEERS

                STATEMENT OF KATHERINE SCHINASI

    Ms. Schinasi. Chairman Davis, Mr. Waxman, members of the 
committee, I appreciate the opportunity to be here before you 
today to talk about GAO's work on reconstruction contracting in 
Iraq.
    I think I would just like to briefly touch on progress in 
three sectors that we have been tracking, and then turn 
specifically to the contracting challenges the United States is 
facing as it continues its reconstruction efforts.
    As we and others have reported, the United States has not 
achieved outcomes from reconstruction efforts in Iraq as 
anticipated. As of August 2006, oil production was below pre-
war levels and restoration of electricity and new or restored 
water treatment capacity remained below stated goals. One-third 
of DOD's planned construction work still needs to be completed, 
and the hope is now that will be done before the end of 2008.
    Because the United States is relying so heavily on 
contractors to carry out reconstruction efforts, the strengths 
and weaknesses in how the Government has implemented its 
contracting process has a great bearing on the outcome of the 
U.S. efforts. The contracting problems we and others have 
reported on over the last several years are emblematic of 
contracting problems we have identified in numerous other 
situations, but have more dramatic consequences for failure as 
the nature of the task for the United States is so large and so 
costly.
    We have made numerous recommendations to correct 
contracting problems we have identified, which the agencies 
have generally agreed with, but we continue to find that the 
practice is not always in line with the policy and guidance. 
When we reviewed the causes for individual project decisions 
and outcomes, the problems we find tend to be interconnected, 
but they almost always start with requirements.
    At the sector, program and project level, the failure to 
define realistic requirements, that is those that can be 
accomplished with available resources, makes it more difficult 
to take every subsequent step to get to a successful outcome. 
Without understanding the resources of time, money and capacity 
that are needed to achieve a stated requirement, reasonable 
estimates cannot be established. Without reasonable estimates 
at the start, program managers cannot stay on track.
    The resulting instability has negative consequences on two 
levels. First, it affects individual projects as funding needs 
fluctuate, schedules slip and requirements are either added or 
dropped. Second, instability in individual projects has 
repercussions at the program and sector level, as money 
allocated for one use gets pulled away for other uses.
    Without matching reform as to time, money and capacity 
resources before beginning projects, the cascading effect of 
the contract level is the inability to definitize contract 
terms and conditions. The resulting situation puts the 
Government at risk of having to accept costs that it might not 
otherwise bear. For example, recently reported that DOD 
contracting officers were less likely to remove costs 
questioned by the Department of Defense's Contract Audit Agency 
when the contractor had already incurred those costs.
    Conversely, in the sample of DCAA audit reports we reviewed 
in which the negotiations took place before the work was 
started, the portion of questionable costs removed from the 
contractor's proposals was substantial.
    Without agreed-upon requirements, terms and conditions, 
closer management and more oversight are needed, but more 
oversight requires more resources. There are numerous reported 
examples of not having enough skilled people on the ground. For 
example the design-build contracting approach, which was put in 
place for a large segment of the reconstruction work, by its 
very nature recognized the lack of sufficient Government 
resources as the United States turned to a contractor to manage 
contractors' performance.
    In our June 2004 report, we also found that the lack of 
contract administration personnel contributed to shortfalls in 
contract performance. We have found that without sufficient 
people supporting project definition and execution, program 
officials have turned inappropriately to the use of interagency 
contracting vehicles, which is one of GAO's high-risk areas. We 
have reported both on the individual use of interagency 
contracts and on the breakdowns that occur throughout the 
process as a whole. One of the most significant of those is the 
role played by contractors in the process, which is usually 
reserved for Government personnel.
    Finally, underlying market discipline offered by 
competition has not always been present, especially in the 
early stages of the reconstruction efforts. Competition can be 
used most effectively when advance planning occurs, which 
brings me back around to the need to establish realistic 
requirements at the beginning.
    As I noted at the outset, these conditions are not new or 
unique in Iraqi reconstruction efforts. But understanding not 
just where we are today, but why is important to make 
corrections and prevent repeating mistakes. As our work has 
demonstrated, it is often not just one of these elements that 
leads to failed outcome, but a combination of several or 
sometimes all of them. Just as multiple factors are responsible 
for failure, multiple actors also share this responsibility.
    So moving ahead to successful acquisition outcomes must 
also be a shared effort and responsibility between 
policymakers, program managers, contracting officers and the 
contractors themselves.
    Mr. Chairman, that concludes my summary. I would be happy 
to take your questions.
    [The prepared statement of Ms. Schinasi follows:]

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    Chairman Tom Davis. Thank you very much.
    Mr. Bowen, thank you for being with us.

               STATEMENT OF STUART W. BOWEN, JR.

    Mr. Bowen. Thank you, Mr. Chairman, and thank you, Ranking 
Member Waxman and members of the committee for having me here 
to testify today about SIGIR's oversight of Iraq 
reconstruction. And thank you, Mr. Chairman, for your support 
of my office since its inception 2\1/2\ years ago.
    Mr. Chairman, you said accurately in your opening statement 
that not everything is wrong in Iraq, and that is true. A fair 
reading of our full reports demonstrably underscores that fact. 
Indeed, 70 percent of the projects we visited and 80 percent of 
the money allocated to them indicate that those projects, from 
a construction perspective have met what the contract 
anticipated.
    Mr. Gutknecht pointed out that oversight is not a partisan 
issue. That is absolutely correct and is the approach that I 
take to this issue and I think is the right approach. It is the 
message that I give my auditors, inspectors and investigators. 
I just returned Monday from a 50 day trip to Iraq, where I met 
with senior U.S. leaders in the reconstruction programs, senior 
Iraqis involved in it, in the anti-corruption fight, and also 
visited sites outside the Green Zone.
    I learned a lot. I learned from General Corelli, the 
commander of the multinational Corps Iraq, the troops on the 
ground, the guy who is looking out for our soldiers there, that 
the solution in Iraq is not primarily military. It is an 
economic and political one. And what that means is that it 
underscores the paramount importance of succeeding in the 
reconstruction program moving forward, and that means, as the 
chairman pointed out, we need to learn our lessons. That is 
something that SIGIR has pushed forward in real time in the 
course of carrying out our mission.
    In January, we did a lessons-learned report on human 
capital management, effectuated some positive changes in how 
personnel are managed in Iraq. We released a report in August 
on contracting and procurement in Iraq, and it has prompted 
responsiveness. Paul Brinkley in the Business Transformation 
Agency under Deputy Secretary England's direction are making a 
real-time difference in trying to improve how contracting is 
done over there, and more to the point, changing the system so 
that it operates better moving forward.
    Ambassador Khalizad has strongly supported our mission, as 
did Ambassador Satterfield when he was DCM and now is senior 
advisor to Secretary Rice, and Ambassador Speckhard. As a 
result, our audits, when they finally see the light of day in 
writing, mostly have their findings resolved, because they have 
been recognized by management, the issues raised by them, that 
is, and the problem is addressed, at least solutions put in 
place.
    So it is true. A week ago I visited a site that is outer-
city, the Baghdad Police College. It was an extremely 
disappointing visit. It is essential that we succeed on the 
security front. The Baghdad Police College is the place where 
police will be trained. Phil Galioto, the dean there, pulled me 
aside and was really in distress about the fact that he had to 
close that college for 2 weeks because of its unsanitary 
conditions, and his fear that he was going to have to close it 
again when he has this parade of recruits that are lined up 
ready to come through and learn how to bring security to 
Baghdad.
    The reality is that those issues are out there, but the 
reality also is, as he told me, is the oversight was prompting 
change. Indeed, the resources he was seeking and said he needs 
are moving forward to address the significant problems there.
    Mr. Chairman, you asked us to address contracting issues. I 
am happy to discuss the lessons-learned report. They are the 
subject of potential pending legislation from Senator Collins 
and are I think aimed at adjusting the system to improve 
contracting. But the point of my contracting report ultimately 
is that the story of Iraq reconstruction from a personnel 
perspective, from a contracting perspective, and from a program 
and project management perspective, we are writing that report 
now. It will be out in December. It is a story of gradual 
progress. It is a story of adapting, learning lessons, and 
improving the execution in a situation where security is a 
fundamentally overriding matter.
    I would be happy to address in the question and answer 
section primary health care issues and the Basrah Children's 
Hospital issue that you were concerned about.
    Thank you for this time.
    [The prepared statement of Mr. Bowen follows:]

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    Chairman Tom Davis. Thank you.
    Ambassador Satterfield, thanks for being with us.

         STATEMENT OF AMBASSADOR DAVID SATTERFIELD, SR.

    Mr. Satterfield. Thank you, Mr. Chairman, Ranking Member 
Waxman, members of the committee. I appreciate the opportunity 
to testify today before this committee on the progress we have 
made to date on Iraq reconstruction, and also on the steps we 
have taken to execute more effectively our oversight 
responsibilities and ensure that the taxpayers' moneys are 
spent wisely, effectively and to good purpose for the United 
States and good purpose for the people of Iraq.
    We recognize fully the enormous responsibility we have to 
deliver tangible benefits to the Iraqi people, to manage 
honestly and effectively the billions of dollars with which we 
have been entrusted. We don't intend to underestimate or 
understate the mistakes that have been made, but we also do not 
wish to understate the successes that have been achieved, for 
there have been significant successes, successes in the face of 
perhaps the most difficult operating environment in the world.
    Success is critical in Iraq in terms of our ability, Iraq's 
ability and the support of the international community to 
economic development and growth. Security measures alone, as 
General Corelli and others have said, cannot secure a stable, 
peaceful Iraq. Only security measures augmented by good 
governance, progress on reconciliation, and development and 
growth of Iraq's economy to provide a stake for all of Iraq's 
citizens in a different, more peaceful Iraq can achieve those 
goals.
    We believe thoughtful, detailed, oversight can strengthen 
our management of contracts and improve outcomes on the ground. 
It already has. Over the last year, we have undergone a sea-
change, literally, in how we award, manage and monitor 
contracts. We have shifted more contracts to Iraqis, revised 
cost-to-complete accounting procedures, moved away from design-
build and cost-plus contracts, and have given grants directly 
to Iraqi ministries. In short, we have learned from the past. 
We are adapting. We will continue to adapt to changing 
conditions on the ground.
    We take seriously and we apply in real-time, lessons 
learned from the excellent sustained work of the Special 
Inspector General for Iraq Reconstruction, our colleague Stu 
Bowen, the Government Accountability Office, as well as the 
Inspectors General from the Department of State, USAID, and the 
Defense Contract Audit Agency. We look forward to the 
committee's observations and suggestions to help us further 
improve this work.
    I would like to begin with a brief review of what the IRRF 
funds have accomplished, acknowledge the difficulties we have 
encountered, and review the specific mechanisms that we have 
put in place to tighten oversight of this program.
    I would like to begin by outlining what we have achieved. 
IRRF-funded projects have had a measurable and significant 
impact on the lives of Iraqi citizens, but I want to make a 
comment at the beginning. This impact, this positive impact 
comes against the backdrop of the magnitude of need in Iraq for 
basic infrastructure development. That is a need estimated by 
the World Bank in 2004 at over $100 billion. It was never our 
intent to meet through U.S. funds all of these goals. Our 
intent was to begin a process, to start a process which Iraqi 
efforts themselves and the support, the strong support, the 
vital support of the international community and the Middle 
East itself, Iraq's neighbors, would be required to complete.
    Electricity, our projects have added, rehabilitated or 
maintained almost 3,000 megawatts of electricity generation. 
What this means is about one-third of all of the power 
transmitted today, this day, to Iraq's citizens comes as a 
result of our efforts and our funding. Other projects have 
succeeded in rehabilitating Iraqi equipment that will provide, 
when infrastructure is improved for transmission, still more 
ability to deliver power.
    On water, our projects have improved significantly. Access 
to fresh water and to sewage treatment services have included 
19 major water treatment plants, as well as smaller projects 
that have improved access to drinkable water. Five million 
Iraqis have access today to clean water and sewage services as 
a result of our efforts. That is not insignificant, and 
completion of all of our planned projects will bring drinkable 
water to an additional 8 million Iraqi citizens.
    Before the war, Baghdad had no functional sewage treatment 
plants. All sewage was simply dumped into the Tigris River, 
polluting all downstream consumption. Nine major plants have 
been rehabilitated and have capacity to serve 5 million Iraqis. 
Three of these plants are in Baghdad, two-thirds of the city's 
population are being served by what they do. That is not 
insignificant.
    Our funding has rehabilitated or refurbished over 4,000, 
that is over 30 percent, of Iraq's schools, trained 60,000 
teachers, provided over 8 million new textbooks, and we have 
inoculated through the efforts of AID virtually all of Iraq's 
children against the diseases of polio and measles.
    Oil production, vital to that country's economic future, 
production and exports as a result of our efforts have 
increased above 2002 pre-war levels. Exports have also exceeded 
pre-2002 efforts. That is not insignificant.
    We have also had setbacks, including work on the primary 
health care centers and the Basrah Children's Hospital, and 
like my colleagues, I am prepared to address those issues in 
response to committee questions. But I want to stress in 
closing, the lessons learned here. We have tightened, in our 
mission in Iraq and here in Washington, the procedures through 
which we oversee contracting, through which we assess the 
situation on the ground. We have improved the way we do our 
accounting numbers so that we can have a real-time estimate of 
funds available, and can shift those funds within the 
parameters set by the Congress to meet changing priorities on 
the ground. We want to work with the committee. We want to work 
with our oversight agencies with the various auditing systems 
in place now, to improve still further our work. Lessons have 
been learned and will continue to be applied on the ground as 
we seek to better ensure that the taxpayers' money is spent 
wisely and all benefit from those funds.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Satterfield follows:]

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    Chairman Tom Davis. Thank you very much.
    Mr. Bever, thanks for being with us.

                  STATEMENT OF JAMES A. BEVER

    Mr. Bever. Thank you, Mr. Chairman and members of the 
committee. USAID thanks you for the honor of being able to be 
here with you this morning.
    First, I would like, as a U.S. Foreign Service Officer, to 
thank the chairman and members of the committee for the times 
when you come to the field and see what we do in the field, and 
you take the risks that we also take as Foreign Service 
Officers in the field so you understand the challenges that are 
there, and you bring us courage that what we do to serve our 
country is the right thing. Thank you.
    In addition to the support for democratic infrastructure 
building and economic infrastructure building in the ministries 
of finance, I would like to focus my very brief comments on the 
physical infrastructure. There are some things that USAID and 
American taxpayer dollars have done today which we take for 
granted. First is Umm Qasr Port. The dredging of that port, the 
repair of that port early on in this conflict allowed hundreds 
of thousands of tons of supplies to come in to the Iraqis in a 
timely fashion.
    The repair of the airport, both in Baghdad and Basrah, has 
allowed thousands of commercial and civilian flights to come in 
and out of Iraq and around Iraq. Thousands of small 
infrastructure projects in every one of the provinces of Iraq 
have allowed the visible, tangible manifestation of American 
goodwill and caring and improvement at the local level.
    Ambassador Satterfield has also commented on the power 
sector, and has commented on the water and wastewater. I won't 
go further on that, except to say that we have also been very 
active in the rural areas. This is where 25 percent of all the 
jobs are created and maintained in Iraq. So much of our 
assistance has been in building agricultural infrastructure, 
and 500,000 farmers have water today that didn't have it a few 
years ago.
    The Ambassador also addressed our contribution to education 
and to health. I won't go further there.
    I would like to just close, and I will make my comments 
very brief, by saying that our agency, recognizing the 
importance of Iraq, recognizing the importance of SIGIR and of 
GAO and the IG comments, has created a Special Deputy Assistant 
Administrator position specifically for Iraq. I was brought in 
by Ambassador Tobias, our Administrator, from Israel where I 
was serving for the last 2 years to help enhance Israel's 
security, and advance Congress' plans both there and in 
Afghanistan before that, to focus on Iraq. So we welcome and 
look forward to continuing to work with our accountability 
agencies. We are proud of the Government Accountability Office 
finding that USAID competitively awarded contract actions for 
99 percent of all of our obligations and commitments.
    And last comment, under our infrastructure activities, we 
are also very proud that 97 out of 99 of our activities have 
now been completed. The remaining two will be completed in the 
coming year and we will be sharing those activities with Army 
Corps and transferring them shortly.
    Thank you.
    [The prepared statement of Mr. Bever follows:]

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    Chairman Tom Davis. Thank you very much.
    Ms. Ballard, thanks for being with us.

                   STATEMENT OF TINA BALLARD

    Ms. Ballard. Good morning. Thank you, Chairman Davis, 
Congressman Waxman, and distinguished members of the Committee 
on Government Reform, for this opportunity to report to you on 
the U.S. Army's reconstruction contracting efforts in Iraq.
    It is my privilege to represent the Army leadership and the 
military and civilian members of the combined reconstruction 
program management and contracting work force team. We 
appreciate your wisdom, advice and steadfast support. The Army 
is the executive agent for the Department of Defense 
reconstruction and relief mission in Iraq, as outlined in the 
IRRF, and is responsible for the execution of approximately $13 
billion of the $18.4 billion appropriated by Congress for 
projects in Iraq.
    In January 2005, with the cooperation and leadership of the 
U.S. Central Command, the Joint Contracting Command-Iraq and 
Afghanistan [JCCIA], was established. This Joint Command, which 
is headed by a two-star general, operates under the Army's 
acquisition authority and has more than 160 people in two 
theaters of war who are working in dangerous and difficult 
conditions.
    The JCCIA operates in full compliance with Federal 
acquisition regulations and to date we have awarded more than 
4,000 contracts for the reconstruction of Iraq. We do this 
mission with great pride and gratitude to Congress, the Army 
team and our interagency partners, the Department of State and 
U.S. Agency for International Development. This team has proven 
to be resourceful and resilient, while adjusting to every 
challenge presented by the evolving conditions in Iraq.
    I want to emphasize the following important point in 
particular. The reconstruction program in Iraq has been one of 
the most audited efforts ever undertaken by our Government. 
From the beginning, we have welcomed this good government look 
at our work. Our policy throughout this mission has been to 
work side by side with every auditor in order to ensure the 
proper expenditure and oversight of money allocated by the 
Congress.
    We have also found that the auditors serve a valuable role 
in helping us execute our mission. While the challenges have 
been daunting at times, we have maintained a tremendous sense 
of urgency and intense operational tempo with regard to our 
reconstruction mission.
    In summary, we are an Army at war. We are proud of our 
accomplishments and we want the people of this great Nation and 
you, the Members of Congress who represent them, to know of 
this great effort in helping to create and build a stable and 
successful Iraq. With your continued support, we will succeed.
    This concludes my opening statement, Mr. Chairman. Again, I 
thank this committee for its continuing wisdom, guidance and 
steadfast support. I look forward to your questions.
    [The prepared statement of Ms. Ballard follows:]

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    Chairman Tom Davis. Tina, thank you very much.
    Mr. Tyler, thank you for being with us.

                  STATEMENT OF J. JOSEPH TYLER

    Mr. Tyler. Mr. Chairman, Ranking Member Waxman, and members 
of the committee, thank you for the opportunity to discuss the 
successes and some of the challenges the U.S. Army Corps of 
Engineers and the team we work with has experienced in 
execution of the reconstruction program in Iraq.
    I have had the pleasure of having oversight management for 
this program from the time it originally started. I would like 
to emphasize a few points included in my written statement.
    First, the Corps of Engineers is committed to supporting 
the Nation's global war on terror. We have supported the 
operation in Iraq from the very beginning. Our entire work 
force of 34,000 personnel has been available to support the 
effort. About 3,300 personnel from both our civil works and 
military mission areas have volunteered for deployment, many 
for multiple deployments. The remaining personnel that stay 
here in the States are often used for reach-back support of our 
personnel on the ground in-theater.
    Our multi-talented expeditionary work force has allowed us 
to respond positively to this reconstruction mission. Our 
current work force in Iraq consists of military personnel, U.S. 
Government civilians, DOD contractors, and Iraqi associates. We 
utilize these personnel in various capacities to allow us to 
execute our mission in the most efficient and effective manner. 
We will use the Iraqi associates in insecure areas which would 
endanger U.S. personnel or draw unwanted attention to the 
reconstruction effort. It is because the Iraqi associates are 
able to move more freely throughout their country.
    Now, beginning in October 2005, the Corps' office in Iraq, 
our Gulf Region Division [GRD], and its three district offices, 
began a gradual evolution toward consolidation with the Project 
and Contracting Office [PCO]. This consolidation commenced as 
reconstruction projects moved from the planning and design 
stage of execution to the construction stage. GRD has always 
supported PCO in construction oversight. Therefore, it made 
sense from a cost and program execution perspective to 
streamline our personnel and processes by consolidating the 
offices and focusing on completing program construction. This 
consolidation will be complete next month.
    Overall, the Corps has been successful in oversight 
management and execution of its reconstruction mission. We have 
completed construction on 3,100 quality projects at a cost of 
about $4 billion. There are slightly over 800 projects under 
construction right now, and there are over 500 projects that 
are anticipated to start construction in the next few months.
    This success was not without challenge. Construction 
quality is always a challenge, even in the United States. The 
challenge is amplified by the Iraqi environment. Our personnel 
and our contractors, United States and Iraqi alike, are 
constantly challenged in the day-to-day operations. In spite of 
that challenge, we are able to deliver quality facilities for 
the Iraqi people.
    There are always the exceptions that rise to the surface in 
getting significant scrutiny. These exceptions also demand our 
intensive management, and often extraordinary actions to 
achieve the appropriate remedy and the quality results.
    Mr. Chairman, this concludes my opening remarks. Again, I 
thank you for the opportunity to discuss the Corps' 
reconstruction efforts in Iraq.
    [The prepared statement of Mr. Tyler follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    
    Chairman Tom Davis. Thank you.
    Let me start. Ambassador Satterfield, let me just ask you, 
in terms of electrical power, does Iraq have more power or less 
power today than when we came in?
    Mr. Satterfield. It has more power, Mr. Chairman, 
significantly more power. There are limitations to the amount 
that can be physically transmitted on Iraq's infrastructure, 
but within that limitation, we are contributing as a result of 
our projects, our efforts and our money, over one-third of the 
delivered transmitted power today to Iraq's citizens.
    Chairman Tom Davis. OK. Is there still a lot of sabotage of 
that going on?
    Mr. Satterfield. There is significant sabotage. If you look 
nationally at electrical power, its operations and maintenance 
deficiencies, fueling problems, that is delivering the right 
kind of fuel to the right plants on time, that is the biggest 
contributor, rather than sabotage. But if you look at Baghdad 
as a signal piece of that puzzle, the amount of damage or 
deficiencies due to sabotage is about one-third of the total 
power.
    Chairman Tom Davis. And Baghdad got the bulk of the power 
under the previous regime.
    Mr. Satterfield. Under the Saddam regime, Mr. Chairman, 
Baghdad deliberately received the bulk of the power for 
political reasons. The rest of the Nation was starved.
    Chairman Tom Davis. Thank you.
    Mr. Bowen, let me ask, you just released a report on the 
shoddy construction of the Baghdad Police College that is all 
over the headlines today. Obviously, this lax contract 
oversight didn't perform. It just has to be unacceptable. What 
were the prime contractor's reaction when these defects were 
pointed out? And how did we get to this?
    Mr. Bowen. It is a good question. It boils down to a lack 
of oversight, both on the scene by----
    Chairman Tom Davis. But even with oversight, the contractor 
should have, I mean----
    Mr. Bowen. You're right. The way this happened, it is 
subcontracting. You understand this. Parsons got the design-
build contract for facilities in March 2004, a $500 million 
IDIQ. Included in that were the health care and also other 
facilities, including the Baghdad Police College. It is a $73 
million project. The work is done through subcontracting.
    Chairman Tom Davis. Let me ask, we do encourage them to 
hire Iraqis for this. Isn't that part of the policy?
    Mr. Bowen. That is exactly right. It is incumbent upon them 
to hire Iraqi firms that are competent, and there are many. We 
talked about the fact that many of our projects that we have 
seen have been successful and they have been performed by Iraqi 
firms. So that is not the dispositive issue. It is what 
happened at the Baghdad Police College that is determinative.
    But in constructing there, there were all manner of 
shortfalls. They used the wrong pipes. They didn't have 
fittings. They just cut pipes, cemented them together, and then 
finished the floor. Of course, they burst, and that was in all 
barracks. There is a half-completed laundry facility that 
$300,000 was invested in that has to be torn down. They are not 
going to finish it. There is another facility next to it, same 
story. There is a beautiful classroom building out just beyond 
that laundry facility that has no power.
    Chairman Tom Davis. If this were out in Fairfax or in Los 
Angeles, you would have building inspectors looking at all of 
this. Do they not have that regime in place there?
    Mr. Bowen. They did not. The Deputy Commander of GRD went 
out there with me a week ago. I addressed this exact issue, 
that you are pointing to. He was unaware of what the oversight 
situation was from the GRD perspective before the turn of this 
year. And so, that is something that we continue to drill down 
on. This was a quick reaction report to draw attention to it, 
to get the resources there to fix it now, because we are 
scheduled to turn this over at the end of the year.
    Chairman Tom Davis. What is the contractor's responsibility 
in something like this? Ultimately, they are building it. If 
you don't have a government regime doing the inspections, then 
they need to do it, and it sounds like that wasn't done.
    Mr. Bowen. You are exactly right. It is a multi-layered 
oversight process and that is the case for every project in 
Iraq. Parsons had a duty to supervise how this Iraqi firm was 
doing. In other words, get a look at exactly what they were 
planning on doing with that plumbing and not to let it all get 
laid and then burst and be a disaster.
    Chairman Tom Davis. I guess our problem is, I mean, you can 
look at one project, but when something can go this badly, and 
if anything could go wrong, it did go wrong here, and you can 
point back and forth, but the concern that I have, and I think 
Mr. Waxman and other Members have is, is this systemic? How 
many other projects like this are going on?
    Mr. Bowen. I am glad you asked that. I have a list here of 
the 14 Parsons projects that our inspectors have visited; 13 of 
them don't meet standards. Ironically, the one that does meet 
standards, the Nasiriyah Prison project that I visited in May, 
was terminated for default for other reasons, primarily for the 
issues I saw then. It was de-scoped from serving 4,400 
prisoners to 800, and the cost was 50 percent more. But I was 
there and I saw the construction at that facility is of quality 
service, but the forward border post at Sulaymaniyah, it was a 
design flaw in the center beam that our engineers, actually my 
inspectors are an engineer and an auditor, the engineer picked 
up on it and adjusted the design. The Allaminon primary care 
facility, the five PHCs we visited, all----
    Chairman Tom Davis. My last question, I get you, but are 
these taxpayer funds or are these Iraqi funds that were paying?
    Mr. Bowen. Taxpayer funds. These are IRRF projects.
    Chairman Tom Davis. Mr. Waxman.
    Mr. Waxman. Mr. Bowen, did Parsons get paid?
    Mr. Bowen. Yes.
    Mr. Waxman. Are they going to pay any of this money back?
    Mr. Bowen. No. The structure of contracting, cost-plus, 
means that the U.S. Government bears the burden, so to speak, 
of paying for what happens in the course of performing that 
contract. That means if a subcontractor fails, and you have to 
move on to somebody else, that cost is borne. That happened up 
in Urbeyo, the water treatment plant I visited last November. 
Same story.
    Mr. Waxman. Well, let me interrupt you. You issued this 
report that just came out about this Baghdad Police College. I 
have some photos of the police college that I am going to ask 
be available. You said our job in Iraq is to provide help for 
their economy and their security. What could be a more 
important symbol than giving them the ability to have police 
trained for security and buildings that will give them a boost 
to their economy? What you found in your report is truly 
disgusting. The photos don't really even capture it all. It is 
a civil security project in the country that is a failure. It 
is the Baghdad Police Academy and it is a disaster.
    I went through some of the points earlier in my opening 
statement about fecal matter and urine going right through the 
building. It is not a very proud symbol for the U.S. efforts in 
Iraq, is it?
    Mr. Bowen. As I said, the plumbing design and execution was 
extremely poor. As a result, it failed once it came into use.
    Mr. Waxman. Well, the chairman asked you this. Who is 
responsible for this disaster? Is it Parsons? Is it the Army 
Corps of Engineers? Or is it both?
    Mr. Bowen. I think it is a shared responsibility.
    Mr. Waxman. And is this the first project that Parsons and 
the Corps of Engineers bungled?
    Mr. Bowen. This is the most problematic project that we 
have visited.
    Mr. Waxman. But is it the first?
    Mr. Bowen. As I said, we have visited 14 Parsons projects, 
four border forts up in Sulaymaniyah, five PHCs in the Tamime 
area. Total value of the projects we have looked at is $136 
million, and I wouldn't use the word ``bungled,'' but I would 
say that they have not met the contract's expectations.
    Mr. Waxman. As I indicated, this is perhaps the new symbol 
of the Bush administration's failure, the dilapidated and 
disgusting facilities of the Baghdad Police College. We spent 
$75 million of taxpayers' money on it. I am trying to figure 
out how we got to this point. You have indicated you thought it 
is a failure of oversight.
    Well, the Washington Post reported in 2003 and 2004, a 
Defense Department political appointee named Jim O'Beirne 
directed and organized a systemic screening process to hire 
Republican loyalists for the key Provisional Coalition 
Authority. Mr. O'Beirne was the Pentagon's liaison to the White 
House. Mr. O'Beirne's office posed blunt questions about the 
political leanings of CPA applicants. People who were supposed 
to work on overseeing these kinds of projects for this 
provisional government that we were in charge of were asked 
questions about whether they voted for George Bush in 2000, and 
even their views on abortion.
    To recruit the people he wanted, O'Beirne sought resumes 
from the offices of Republican Congressmen, conservative think-
tanks, and GOP activists. He discarded applications from those 
through his staff that were considered ideologically suspect, 
even if the applicant's possessed Arabic language skills or 
post-war rebuilding experience.
    Ambassador Satterfield, is this true? Was the Pentagon's 
White House liaison screening people to run Iraq on the basis 
of how Republican they were?
    Mr. Satterfield. Congressman, I cannot comment on the CPA 
period. What I can comment on, though, is the extraordinary 
professionalism, dedication and qualifications of the staff at 
our mission in Iraq, in Baghdad and elsewhere, working on these 
development issues today and over the course of the past years.
    Mr. Waxman. But so much of what we are talking about, 
including this police academy, was handled during the CPA 
period. There was one specific example of this cronyism in the 
health sector. There was Dr. Frederick Berkel, Jr. He was 
removed as the head of Iraq's health care system 1 week after 
the fall of Baghdad because, as I understand it, the White 
House wanted a loyalist. My staff talked to Dr. Berkel. And the 
e-mail he received informed him that he was removed purely on 
politics.
    Mr. Bever, you are USAID, can you tell us whether Dr. 
Berkel was removed from his position based on politics? Did 
USAID believe he was not qualified?
    Mr. Bever. I am not qualified to answer that particular 
question. I have not seen that e-mail, sir. We can get a 
question for the record if you would like.
    Chairman Tom Davis. We will put that on the record.
    Mr. Waxman. Thank you.
    Chairman Tom Davis. Mr. McHugh.
    Mr. McHugh. Thank you, Mr. Chairman.
    Obviously, the conditions at the extreme are unacceptable, 
the hemorrhaging of taxpayers' money is despicable, and I would 
hope we would all want to see it stopped. That is why we are 
here, in large measure, I would hope.
    Mr. Bowen, you mentioned the configuration of the contract 
as cost-plus. What is the reason for that configuration?
    Mr. Bowen. Because of the risks that contractors must bear 
when going to a place like Iraq, about which requirements are 
limited or unknown.
    Mr. McHugh. Would it be your considered judgment, that is 
an absolutely essential component of any contract to be 
successfully let? Or is that just something we have allowed 
ourselves to slide into?
    Mr. Bowen. No, absolutely. It is an essential tool in 
performing construction contracts in contingent environments. I 
am not arguing for the abolition of cost-plus. I am just 
arguing for a review of it to see how it can be better tuned to 
meet the needs in contingent environments.
    Mr. McHugh. Which leads me to my next question. Why is it 
not possible, and this is not strictly in your lane, I 
understand, but you have been there. Your folks have been 
there. You understand the conditions. Why would it not be 
possible, even with the security situation, and I have been 
there six times, and I understand, not to have some codicil in 
the contract structure that requires a minimum amount of 
applicable oversight? It sounds to me as though Parsons was out 
at the oasis somewhere.
    Mr. Bowen. That is a significant point. The fact is that 
the oversight is expected and part of the contracting process. 
There are controls in the system that needed to be exercised 
that didn't. For example, as one of our audits this last 
quarter underscored with respect to DOD IDIQ contracts, the 
need for definitization was viewed as voluntary, and that was 
inaccurate as the General Counsel to the Army observed in a 
June opinion.
    The lack of that discipline within the cost-plus contract 
system created leeway for waste.
    Mr. McHugh. Do you think there was a cause of action 
against Parsons?
    Mr. Bowen. Let me put it this way, I have been an advocate 
for terminations for default whenever the Commander of JCCIA 
and I sees it as appropriate.
    Mr. McHugh. Let me state, I do. I think, for the record, 
for whatever that is worth, based on what I know, and maybe I 
could learn more that would convince me otherwise, but it seems 
to me, as I believe I heard you say, out of 14 Parsons 
contracts, 13 you found to be unacceptable.
    Mr. Bowen. The construction at the border posts and at the 
PHCs that we visited, the Primary Healthcare Clinics, was 
substandard, did not meet contract expectations.
    Mr. McHugh. And 13 of 14, was that the figure?
    Mr. Bowen. Yes. And the 14th was the Nasiriyah Prison, 
which was ironically terminated for default.
    Mr. McHugh. So when they get the construction right, 
something else goes wrong?
    Mr. Bowen. That is right. I think the reason was that the 
scope was reduced from 4,400 to 800, without the cost being 
similarly reduced.
    Mr. McHugh. Thank you.
    I would turn to Ms. Schinasi. You spoke about the 
fundamental lack of oversight being, in your judgment, the No. 
1 reason why we have the conditions we are talking about here 
today. Did I hear you correctly? I would be curious if you are 
able to evaluate the reason for that lack of oversight. In 
other words, is it a resourcing problem from your judgment? Or 
is it just a matter of lack of attention? Can you quantify 
that?
    Ms. Schinasi. I think it started out as a resource issue. I 
mentioned the whole design-build construct, which is the 
management structure under which a lot of these projects got 
started. In that project management structure, we relied very 
heavily on contractors to manage contractors. That was in part 
a decision made for resource reasons.
    Mr. McHugh. OK. I just have a few seconds left. My friend 
from California, in his opening statement, talked about what he 
described, I am sure he is absolutely correct, 15 years ago, a 
very painful experience in oversight that he went through 
talking about cronyism and corruption, two of the words he 
used, at the highest levels of the Department of Housing and 
Urban Development. In either of your two experiences, Mr. Bowen 
or Ms. Schinasi, have you seen any indications that there is 
corruption that would be found in the higher levels of the 
agencies involved in these projects?
    Ms. Schinasi. That is not an issue we have addressed.
    Mr. McHugh. Sir?
    Mr. Bowen. No. As I have said before, corruption is not and 
has not been a pervasive component of the U.S. reconstruction 
program in Iraq.
    Mr. McHugh. Thank you.
    Thank you, Mr. Chairman.
    Chairman Tom Davis. Thank you.
    Mr. Lantos.
    Mr. Lantos. Thank you very much, Mr. Chairman.
    In reading all of these reports and all of this testimony, 
one is confronted with a new language. It is sort of sanitized 
bureaucratese, not English. So what I would like to ask each 
member of the panel briefly is if you would be pretending that 
you are in a living room talking to ordinary people, who don't 
enjoy reading bureaucratese. How would you evaluate and 
characterize the oversight and the accomplishments in this 
field which has cost the American taxpayer $30 billion. We will 
begin with you.
    Ms. Schinasi. Yes, if I can back up from the oversight 
question, I think where I would like to start answering that 
question, is looking at the task we set out for ourselves and 
understanding up front what that task was going to cost, and 
making sure that we had the resources to assign to it, because 
without understanding what you are able to accomplish, we put 
projects in place that perhaps were not executable, 
particularly when you look across the country as a whole.
    So the oversight needs to come in to make adjustments to 
those initial assumptions that proved faulty, and that 
oversight has not been there. We have not been able to make 
adjustments, and so we are at a point now where I think we have 
to step back and look at what is it that we can do, and then 
how are we going to accomplish that with the reconstruction 
projects that are already on the books.
    Mr. Lantos. What you are saying is that initially lots of 
projects were proposed and approved, and according to the 
Inspector General, paid for, which were not feasible to begin 
with and never completed. Let me zero in on the primary 
healthcare center issue, because quite frankly it simply makes 
no sense what you are telling us, Mr. Inspector General. You 
say this project began in March 2004, with a contract for 150 
centers. Is that correct?
    Mr. Bowen. That is correct.
    Mr. Lantos. And only six were accepted as completed by the 
U.S. Army Corps of Engineers 2 years later.
    Mr. Bowen. That is right.
    Mr. Lantos. Well, this failure ratio is a Guinness World 
Book of Records answer. I mean, if you have 150 healthcare 
centers that are planned, funded, construction begun, and 2 
years later you find that only 6 are completed, this requires 
an explanation.
    Mr. Bowen. Mr. Lantos, your core point is correct. The 
primary healthcare program in my view is the most significant 
failure in the overall reconstruction program.
    Mr. Lantos. This was a Parsons project?
    Mr. Bowen. That is right.
    Mr. Lantos. Parsons has a lot of experience. They have 
completed many projects globally over many years. How is it 
feasible, explain it to us in very simple terms, that Parsons 
undertakes a project involving 150 health centers, and 2 years 
later 6 are completed, the contracts are terminated, although 
we paid Parsons. They walk away with the money for 144 that 
were not completed. Explain this to me as a taxpayer.
    Mr. Bowen. I would be happy to. The number of clinics was 
de-scoped to 141, reduced to that number.
    Mr. Lantos. ``De-scoped'' means? Let's use English.
    Mr. Bowen. Right.
    Mr. Lantos. I don't know what ``de-scoped'' is. We started 
with 150 and then we moved it down to 141.
    Mr. Bowen. To 141, you are right. I am sorry.
    Mr. Lantos. That is English.
    Mr. Bowen. I will speak in clearer terms. The six were 
completed.
    Mr. Lantos. Which means 135 were not?
    Mr. Bowen. That is correct. Parsons agreed to finish 20 of 
those clinics that were nearly complete, of which those 6 that 
are complete are part of it. So that is down to 125. A couple 
of clinics were handled by other direct contracting. But here 
is the point, of the balance 122 clinics left in the number 
that I am talking about, they are all either halfway or more 
completed, 50 percent, 75 percent, 90 percent. What the Corps 
of Engineers has done is picked up this mess and developed a 
plan to solve it by contracting out the completion of those 125 
clinics to Iraqi firms for about $40 million.
    The Parsons point to me in the course of performing this 
audit was that they had two significant complaints. One, this 
was supposed to be a 2-year program and they were unilaterally 
directed by the Corps of Engineers to make it a 1-year program, 
so they were expected to build 150 clinics in a year and the 
site selection was difficult in many cases. There was one that 
was placed where there was a swamp. There was so much remedial 
work that had to be done at a number of the sites that they 
simply made some of the PHCs unworkable.
    Mr. Lantos. Since time is short, may I just followup on one 
item, Mr. Chairman?
    Mr. Bowen. Yes, sir.
    Mr. Lantos. When I was in Iraq, I met one of the most 
impressive human beings I ever met, General Petraeus, who took 
me around on his helicopter and we landed many places. He 
showed us that with $5,000, with $20,000, projects were 
completed. We looked at them. They were functioning, and so on.
    In your report, Ambassador Satterfield, and I wonder if you 
can tell us when you went out to take over this assignment?
    Mr. Satterfield. In May of last year.
    Mr. Lantos. In May of?
    Mr. Satterfield. Of 2005.
    Mr. Lantos. Of 2005. Your report says, and I can quote it, 
but I will paraphrase it and you correct me. You say you took 
many of these projects away from these multinational firms, 
gave them to local firms, and saved something like 40 percent. 
You are not in the field of construction management, but you 
have some brains, and you took it away at this incredible 
profit margin, gave it to Iraqi firms at a 40 percent cost 
saving, and your inference was that they are now being 
completed.
    Mr. Satterfield. Yes, Congressman.
    Mr. Lantos. How do you explain this?
    Mr. Satterfield. Congressman, I will build with the remarks 
to my two colleagues here, to answer in as plain English as I 
can the query that you made. What is responsible for the 
mistakes that have been made and what is the course to success 
with the remaining funds, the remaining projects in Iraq that 
taxpayer dollars provide for. It is an examination at the 
highest levels, not just at a working level, of feasibility. 
Does the project make sense? Does it make sense not when it was 
conceived, which may be several years previous, but does it 
make sense in the political, security and needs environment of 
Iraq today?
    That cannot be a one-time assessment. It has to be a 
rolling assessment with dramatic re-thinking at all points as 
necessitated. What is oversight? Oversight has to be 
continuous. It has to be on the ground. It has to also reflect 
the unique circumstances in Iraq. You need more, not less, 
oversight in the difficult circumstances that prevail in that 
country, both the issue of corruption, inadequate performance 
standards, and also the security environment.
    And finally, you need the ability to move from one project 
or mode of funding or contracting to another, as flexibly as 
possible, as you assess feasibility, as you review the results 
of your tight oversight procedures. And you need to do it if 
you are operating in Iraq in a way that is as integrated as 
possible between all of the civilian and military agencies 
operating in that country as possible. There can't be 
stovepipes.
    Chairman Tom Davis. The gentleman's time has expired. Mr. 
Lantos, you have had 10 minutes.
    Mr. Gutknecht.
    Mr. Gutknecht. Thank you, Mr. Chairman.
    First of all, I just want to say to Ambassador Satterfield, 
on behalf of myself and Mr. Shays and others who were in Iraq 
in July, I just want to congratulate you. I have seldom dealt 
with someone who was more professional and told us the good, 
the bad and the ugly of things that were actually happening on 
the ground. The briefing that you gave us was among the best I 
have ever received. I just want to say that we are fortunate to 
have public servants like yourself, who serve at great 
sacrifice in dangerous places like Baghdad. I appreciated not 
only the information you gave us, but the professionalism. It 
has had quite an impact on me.
    I want to come back to a couple of things that are sort of 
glossed over. Ms. Schinasi, this report, and I want to thank 
you for it, I think it is helpful, but even the title, it seems 
to me, is awfully soft: Continued Progress Requires Overcoming 
Contract Management Challenges. ``Challenge'' is a pretty soft 
word, isn't it?
    Ms. Schinasi. It is one that we believe tries to reflect 
the positive side, that something can be done, that we still 
have time to make changes to get better outcomes.
    Mr. Gutknecht. OK, well I will accept that, but let me come 
back to something else that you said in a rather soft way. For 
example, believe it or not, many years ago I was a business 
major, and I wasn't all that great a student, but I do remember 
Management 101. You start with objectives. You have a budget. 
And then you figure out some way to measure or set up a matrix 
in terms of how are you doing relative to your objectives, with 
the budget and so forth.
    It strikes me that we don't really have that now. In fact, 
with all due respect to what we hear from the Pentagon often, 
the answer to every question we give them is, we'll send more 
money. OK? I am not one who believes that more money is the 
answer. In fact, I will just tell you parenthetically that I 
remember when Paul Wolfowitz came up and gave us a briefing 
before this all started. I will never forget what he told us. 
He said that if you divided up the wealth of Iraq per capita, 
it was about the third wealthiest country in the world. And 
that once Saddam was toppled, and we had regime change, which 
sounded so simple and so soft, it was like changing a suit, and 
this would be easy and it wouldn't be expensive for the 
taxpayers.
    The last time I checked, we have invested $323 billion in 
that country. There doesn't seem to be any real end in sight.
    And so what I want to know, again going back to the word 
``challenges,'' do you foresee that we are really beginning to 
set up using Management 101, real objectives with real budgets 
and real ways of measuring those things?
    Ms. Schinasi. Clearly, we have progressed from where we 
were when we started. So we are on a continuum here. I think 
there are different ways to look at the need to measure, but I 
agree absolutely with you, if we don't know where we are trying 
to go, and don't have the measures, then we won't know how far 
it takes, how much longer it is going to take us to get there.
    At the project level, I think something that Ambassador 
Satterfield said is encouraging, and that is we are developing 
measures now to understand what it will cost to complete these 
projects, but the fact that has been lacking until now is a 
very, very serious deficiency.
    Mr. Gutknecht. Let me just come back to the last point, and 
it is sort of embedded in all of our questions and all of the 
concerns that we represent among our constituents, and that is 
the word ``consequences.'' Because it strikes me that even 
today, when we talk about some of these colossal failures, and 
enormous cost overruns, it just seems that there isn't really a 
consequence to these contractors.
    I would welcome input from any of the members of the panel. 
What can we do as a Congress to make sure that we have real 
accountability and that people are held accountable for the 
amount of money that is being wasted?
    Ms. Schinasi. I think one of the most significant findings 
in the report that we issued Monday, that the chairman 
referenced on whether or not the Government is recovering costs 
from contractors, is that we have a situation where we have not 
been able to definitize our contracts. In English, that means 
agree on the terms and conditions under which the contractors 
will be operating, what are the Government's requirements.
    What we found in that report that we issued Monday is that 
if we do not definitize those contracts before we start work, 
the contracting officers believe they have no flexibility to 
recover costs that in retrospect are determined to be 
unreasonable or unallowable or unallocable. So that is an 
internal control that we expect to be working in this cost-plus 
environment that we have talked about this morning, but it is 
apparently not working.
    Mr. Gutknecht. Mr. Chairman, my time is about expired. I 
just want to say that we owe it, this committee owes it to a 
much more aggressive oversight of all of this. I think it has 
to be built on real objectives, manageable objectives, but more 
importantly and finally, people have to be held accountable. I 
think that is one area where both your office and this Congress 
have really not done the job that needs to be done. I think it 
is one thing that the American people expect and I don't think 
those expectations are unreasonable.
    I yield back my time.
    Chairman Tom Davis. Thank you. Mr. Gutknecht, that is 
always a problem is when things go wrong, nobody ever loses 
their job, whether they are losing data or whatever.
    Mr. Van Hollen.
    Mr. Van Hollen. Thank you, Mr. Chairman.
    I would agree with my colleague that we do need much more 
aggressive oversight. On that note, I would like to ask the 
chairman that we maybe have a hearing and bring before the 
committee some of the individuals who were discussed in the 
story about political cronyism at the Defense Department. I 
think when you have the former Deputy Director of the CPA's 
Washington Office saying publicly that we didn't tap the right 
people to do the job. Instead, we got people who went out there 
because of their political leanings, that we need to have 
aggressive oversight on that issue. I would suggest that we 
should have Jim O'Beirne, who apparently held this political 
job at the Defense Department, and others to come up here and 
under oath explain what they did and did not do.
    Chairman Tom Davis. Mr. Bowen did report on that.
    Mr. Bowen. Yes, sir, Mr. Chairman, I did.
    Chairman Tom Davis. You are welcome to ask him.
    Mr. Van Hollen. No, I heard you. You mean, in response to 
Mr. Waxman's statement or something else?
    Chairman Tom Davis. In response to your question right now 
about the hiring practices over there.
    Mr. Bowen. In February, we issued our first report on human 
capital management and did identify in that report the fact 
that there were allegations of political elements in 
decisionmaking on hiring.
    Mr. Van Hollen. Thank you. I understand and I appreciate 
that. It seems to me we should get the people who were directly 
involved, Mr. Chairman. That is what I am saying.
    Let me go on. I have some questions with respect to 
particular contracting, because I do think that in order to 
protect the taxpayers' money and try to get at the bottom of 
some of these contracting problems, we do need exactly the 
oversight that we have all talked about.
    There is a contract that this committee, in fact the 
subcommittee that Mr. Shays chairs, has been pursuing with 
respect to one of the Army's LOGCAP contracts. So Ms. Ballard, 
I have a couple of questions for you, because back on June 13th 
of this year in that subcommittee, I asked about a news report 
about a contractor called Blackwater USA, which was one of the 
fourth-tier contractors under Halliburton's umbrella contract 
of $16 billion. They were a logistic support contract. We have 
a copy on the screen. It is not that visible, but essentially 
what it does is, and I hope you have a copy in front of you.
    It shows that the individual employees that were hired by 
Blackwater were being paid $600 a day. Blackwater was then 
charging $815 a day. Then you go right up through the different 
subs and get up to Halliburton. As Mr. McHugh was pointing out 
earlier, one of the things about a cost-plus contract is there 
is absolutely no disincentive to the person at the top of the 
food chain or anywhere else to charge a reasonable price 
because they get rewarded on a percentage basis on the overall 
amount.
    In any event, this is a list. We had a hearing to try and 
figure out exactly what this contract was costing the 
taxpayers. And so we wrote to the Secretary of the Army and we 
asked a question with respect to these contracts. The response 
we got back was in a letter dated July 14, 2006. I just want to 
read the third paragraph, because it has created a real mystery 
for the subcommittee. That paragraph says, under the provisions 
of the LOGCAP contract, the U.S. military provides all armed 
force protection for KBR unless otherwise directed.
    Additionally, the LOGCAP contract states that KBR personnel 
cannot carry weapons without the explicit approval of the 
theater commander. And then there is this sentence, ``To date, 
KBR has not pursued any requests under the LOGCAP contract for 
personnel to carry weapons, nor has the theater commander 
directed or authorized KBR or any LOGCAP subcontractor to carry 
weapons.'' KBR has stated they have no knowledge of any 
subcontractor utilizing private armed security under the LOGCAP 
contract. Do you see that here?
    Well, if this letter is correct, from the Army, it suggests 
that this whole subcontract for private security personnel was 
never authorized. Is that right?
    Ms. Ballard. Congressman, the information stated in 
Secretary Harvey's letter is accurate. I can't comment at this 
time on this document that you have given me, but I would be 
happy to take it back for the record. I checked before I came 
over to testify, and in fact exactly what is quoted in Harvey's 
letter is the information that I validated before this morning.
    Mr. Van Hollen. Alright.
    Chairman Tom Davis. And that question will be in the 
record.
    Mr. Van Hollen. Thank you, Mr. Chairman. If I could also 
put those documents in the record?
    [The information referred to follows:]

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    Chairman Tom Davis. Without objection.
    Mr. Van Hollen. Along with a contract that we found in the 
course of this investigation, with Blackwater, between 
Blackwater and Regency, that specifically outlines the 
conditions for hiring private security personnel. In fact, it 
says there are 34 vetted U.S. ex-pat professional security 
personnel will form the core of the security organization that 
will support ESS operations.
    So this raises a lot of questions, because if you look back 
at the contract, it specifically mentions that ESS is one of 
the subs to Kellogg, Brown and Root, and Halliburton. So on the 
one hand, we are doing an investigation to figure out what 
these private security contractors were costing the taxpayer, 
because it seemed to be lots of exorbitant costs.
    In the process, according to the letter we received from 
the Army, we learned that in fact the Army never authorized 
Halliburton or any subcontractors from hiring private security. 
Is that right?
    Ms. Ballard. As I said, Congressman, the information stated 
in Secretary Harvey's letter is correct. I did verify that, in 
fact, again this morning before I came over to the Hill. But I 
will pursue answers to your questions.
    Mr. Van Hollen. Just in closing, Mr. Chairman, I just have 
two questions to leave with you. No. 1, was it authorized? And 
No. 2, did Halliburton get paid? Did the American taxpayer pay 
Halliburton for those private security services through that 
food chain on what is now said to be an unauthorized contract?
    Thank you, Mr. Chairman.
    Chairman Tom Davis. Thank you.
    For more questions, we will go directly to Mr. Shays.
    Mr. Shays. Thank you very much, Mr. Chairman, for holding 
this hearing. This is obviously not the first hearing you have 
held on Halliburton and others. This is generated by the 
Comptroller General who basically said Halliburton may be the 
catch-phrase, but there are a lot of other businesses that we 
should be looking into if we don't want to be political. So now 
we have a great opportunity.
    I want to ask you, Ambassador Satterfield, first I want to 
say ditto to what my colleague said about your service and your 
candidness whenever we have interacted. I thank you for that.
    I would like to know, you came in in 2004. When in 2004 did 
you come in?
    Mr. Satterfield. Mr. Chairman, I came in May 2005.
    Mr. Shays. May 2005. OK. So a lot of this is looking back 
for you. You weren't there when it was happening. But when did 
the United States begin to have a sense that we were building 
Rolexes instead of Timexes, and maybe Timex was what they 
needed? In other words, we had some really big projects and yet 
there was a recognition that maybe we should have done smaller 
projects and just gotten a lot more done, and utilized Iraqis 
to do it instead of foreigners. When did that start to become 
evident to folks in Iraq?
    Mr. Satterfield. I can speak to the experience with which I 
am familiar, but I think it is generically the answer to your 
question. During the summer of 2005, particularly the period 
from June to August, we essentially worked, the military, 
General Casey, new Ambassador Khalilzad, and our respective 
teams, on examining all aspects of the U.S. presence, mission, 
strategic goals, lines of operation, and action to achieve 
those goals, benchmarks, monitoring mechanisms to see how 
progress was being made, with an eye to exactly the sorts of 
issues that have been discussed today, not just on the 
development and project execution side, but also on the broader 
issues of political and security goals in the country.
    As I outlined a moment ago to you, that was the approach we 
took. What was the strategic plan? What were the lines of 
operation and action needed to get there? What was the 
feasibility of those lines of operation and action based on 
realities as we saw them and could best assess them in Iraq? 
What were the benchmarks that you needed to put in place on all 
of these goals, on all the lines of operation? And what kind of 
monitoring mechanisms did you set up to ensure that the 
benchmarks were or were not being made? And if they weren't, 
what change in direction was necessary? Could you still achieve 
the same set of strategic goals?
    That was a fundamental revamping of the way we did business 
in Iraq as a collective military-civilian mission. And the work 
was assisted very much in the ongoing flow of reporting, 
recommendations, assessments coming from the various oversight 
entities working in Iraq.
    Mr. Shays. So did that mean that ended up stopping certain 
projects from continuing because there was an assessment that 
they just weren't meeting the objectives?
    Mr. Satterfield. It very much meant a review of contracting 
procedures, execution and projects.
    Mr. Shays. I have a particular bias because having been 
there 14 times, the most memorable trips were when I stayed 
with Mercy Corps and stayed with children. These were non-
government organizations that were given small dollars and they 
were then requested to help build schools and to do programs. 
What they did is, Save and Mercy Corps and others, they hired 
Iraqis to be within their own offices. And then these Iraqis 
hired Iraqis to do the job.
    My understanding was, and I would like to know, Mr. Bowen, 
if you have reviewed that, that a lot of these projects got 
built and a lot of them are still standing.
    Mr. Bowen. You are right, Congressman Shays, there were 
other contracting approaches that succeeded, separate and apart 
from the design-build phase. General Corelli told me last week 
that there are six PHCs open and operating and they were built 
with CERP funds. He approved those allocations and, according 
to him as he represented, they are working.
    So in our contracting lessons-learned report, the second 
recommendation in there is to find ways to institutionalize and 
carry forward alternate, more targeted contracting approaches, 
and indeed that has been the emphasis of the last year under 
Ambassador Khalilzad.
    Mr. Shays. Thank you.
    Mr. Bever, I saw you nodding your head. What is your sense 
about the choice of projects and whether we build them? Just 
weigh in on this. My time is ending, so just weigh in on how 
you would respond to the questions that I asked the others.
    Mr. Bever. Those particular projects you mentioned are 
under the Community Action Program, U.S. PVO's, fully audited, 
fully dependable, who then sub-grant to all kinds of community 
organizations that in themselves also are subject to audit. We 
have had very, very good performance on those, with very low 
security costs, sir.
    Mr. Shays. Mr. Chairman, I would like to just say to the 
Members of Congress, we reinstituted dollars, but not a lot, 
for this program. It has been one of the best. Projects have 
been built throughout Iraq. They are still standing. The Iraqis 
respect them. They built them themselves. It would be nice to 
see more of this activity being carried out.
    I just want to ditto Mr. Lantos's comments about General 
Petraeus. He got it early on, but unfortunately there are 
people that replaced him who didn't.
    Chairman Tom Davis. Thank you, Mr. Shays.
    Mr. Kucinich.
    Mr. Kucinich. Thank you, Mr. Chairman.
    Mr. Bowen, we have come a long way in this Congress from 
the days of $600 toilet seats. Now we have a $75 million 
building project that has been turned into a toilet. Are you 
going to have to tear those buildings down?
    Mr. Bowen. No, they are being refurbished as we speak. As I 
said, effective oversight has moved resources to remediate the 
problems at the Baghdad Police College.
    Mr. Kucinich. In the recommendations, you say you are going 
to perform a critical technical study of the structural 
integrity and load-carrying capacity. How can you say, if this 
report was just issued, that you are not going to have to 
rebuild those buildings?
    Mr. Bowen. Well, as I said earlier, the half-finished 
laundry will be torn down. The building next to it will be torn 
down. The assessment is critical, and I emphasized that to the 
Deputy Commander of the Gulf Region Division of the Corps of 
Engineers when I met with him a week ago. But from what my 
engineers tell me in reviewing that, while there will be a 
couple of buildings that will need to be torn down, the rest 
will require significant work to bring them to standard.
    Mr. Kucinich. Thank you. I have been looking at the 
statistics after listening to Mr. Lantos, and 32 percent of 
14,121 school buildings rehabilitated or refurbished. Have all 
those been inspected to the degree that this has been 
inspected?
    Mr. Bowen. No.
    Mr. Kucinich. Note that, Mr. Chairman.
    Four percent of 141 buildings with respect to health 
clinics have been completed; a $50 million hospital project 
ends up costing $170 million at least. When I am looking at 
these statistics, OK, this is the big leagues, right? It 
doesn't get any bigger than this. This is the big leagues. And 
when you look at these statistics, 32 percent of 114,121 school 
buildings rehabilitated or refurbished, and you say they 
haven't been inspected; 4 percent of 141 health clinics. This 
is the big leagues. The worst team in the big leagues has a 373 
percentage. OK? This performance is not major league. It is 
bush league. And we have put the taxpayers' dollars at risk, 
and we have been given a measure of performance here that I 
think needs a little bit more explanation.
    Now, Mr. Bowen, you had said in your testimony that your 
inspectors reported on projects that represent more than $308 
million in contract value. Of this total, almost $250 million 
or 80 percent have met contract specifications. Now, you go on 
to concede these figures are not statistically significant, but 
let's put them into context of $30 billion in U.S. contracts; 
$20 billion in Iraqi funds. So you have a total of $50 billion 
in contracts, and $250 million of that has been reviewed and 
basically passed on. That is one-half of 1 percent. That is 
where we are, sports fans, major leaguers.
    I want to raise another question here. Mr. Bowen, do you 
know where the infamous missing $9 billion in Iraqi funds has 
gone, for reconstruction?
    Mr. Bowen. Yes, sir. You are referring to my audit of 
January 30, 2005.
    Mr. Kucinich. I am just asking if you are looking for this 
$9 billion.
    Mr. Bowen. We are working with the Board of Supreme Audit 
to track the use of the DFI.
    Mr. Kucinich. ``DFI,'' what do you mean?
    Mr. Bowen. Development Fund for Iraq, which is what that $9 
billion was. That was not taxpayer dollars.
    Mr. Kucinich. No, but I want everyone to know for the 
record, that wasn't taxpayers' money. That was Iraqi money. OK, 
you made the point. Are you finding it?
    Mr. Bowen. I made the point that it was not taxpayers' 
dollars and it is Iraqi money, and that is why we are working 
with Dr. Abelo.
    Mr. Kucinich. Would you agree to a congressional request to 
see the Coalition Provisional Authority documents to determine 
what happened to the missing $9 billion?
    Mr. Bowen. Yes.
    Mr. Kucinich. Thank you.
    Chairman Tom Davis. Thank you very much.
    Who was next? Mr. Clay.
    Mr. Clay. Thank you, Mr. Chairman.
    I thank the panel for being here. Let me start with Ms. 
Schinasi. I know for certain that mismanaged funds, your report 
on the uncover could go a long way in helping to rebuild New 
Orleans, or for that matter helping us in St. Louis, which I 
represent. I am especially disgusted because our domestic 
priorities are being ignored and States are struggling with 
budget cuts as this administration continues to allow billions 
of taxpayer dollars to be wasted year after year in Iraq.
    Tell me, there has been over $50 billion in taxpayer money 
spent toward rebuilding Iraq with little to show for the money. 
According to your report, Pentagon auditors have challenged 
$3.5 billion in questionable charges from contractors. It is 
obvious that no one has been held accountable for wasting 
taxpayer dollars. What is the potential for criminal charges 
against individuals or corporations who have mismanaged these 
dollars? Has any of this information been turned over to the 
U.S. Attorney or Special Prosecutor?
    Ms. Schinasi. Congressman Clay, we have not seen evidence 
that we would believe needs to be turned over, and that is a 
question that we do----
    Mr. Clay. You don't think it needs to be turned over?
    Ms. Schinasi. We do turn over information to the Justice 
Department when we find it.
    Mr. Clay. You don't see anything criminal about ripping off 
taxpayers?
    Ms. Schinasi. We have not seen anything----
    Mr. Clay. You don't see that happening? Let me go to Mr. 
Tyler. Mr. Tyler, let me ask you.
    Chairman Tom Davis. I think she answered that.
    Mr. Clay. Mr. Tyler, I am sorry. Mr. Tyler.
    No, she didn't answer that.
    Chairman Tom Davis. She said they didn't refer it.
    Mr. Clay. Fine, Mr. Chairman. Let me do my time, OK?
    In March 2004, Parsons received a $500 million contract to 
rebuild hospitals, health clinics and buildings. After 2 years 
and wasting $186 million taxpayer dollars, they were found to 
be a poor contractor. Another Parsons contract for $99 million 
was terminated after 2 years for failure to complete prisons. 
Were any of these funds recouped or has the Inspector General 
found that the poor contractor performance delayed completion 
of the project and escalated costs?
    Mr. Tyler. Sir, those contracts were managed. They were 
worked with Parsons. It has already been documented that there 
has been terminations I believe on all of those. And we are 
working to close the contracts out with Parsons, while we are 
working to finish the work through other contractual means.
    Mr. Clay. Have they been put on a list as a poor 
contractor, or not used again? Are you going to continue to use 
them? Maybe Ms. Ballard can answer?
    Ms. Ballard. Mr. Congressman, a contractor's past 
performance is in fact kept record of in the department, and it 
is used as an evaluation criteria in future acquisitions. 
Contractors' past performance is kept record of in the 
department and it is used as a basis for evaluation in future 
acquisitions.
    Mr. Clay. Let me ask Ambassador Satterfield, GAO reported 
that Halliburton contracts total $1.4 billion of the $3.5 
billion in question in unsupported costs in Iraq contracts. It 
is unfortunate that a Halliburton representative is not present 
to answer my question. They have been proven to abuse taxpayer 
dollars again and again. Why does Halliburton continue to be 
granted Government contracts when they have been proven to be 
wasteful with taxpayer dollars?
    Mr. Satterfield. Congressman, we take very seriously the 
reports to which you refer. That is why we have supported the 
work of the GAO, of the Special Inspector, and the other 
auditing and accounting agencies and entities working in Iraq 
today.
    Mr. Clay. Have they been put on a poor contractor list? I 
mean, has anyone decided that these are the people that we need 
to protect our U.S. taxpayer dollars from?
    Mr. Satterfield. I am not aware of any such decision.
    Mr. Clay. Also, I ask you, Ambassador, the Washington Post 
recently revealed the administration's system of hiring, which 
you have heard already. A Frederick Smith, for example, was the 
Deputy Director of CPA. Do you know a Frederick Smith?
    Mr. Satterfield. No, Congressman, I do not.
    Mr. Clay. Well, he went on the record and explained that 
the key criterion for hiring people to serve in Iraq was that 
they had the right political credentials; that they probably 
worked in the Florida recount in 2000. Does anyone have any 
reason to believe that he is not telling the truth? Do you have 
a reason to believe he is not telling the truth?
    Mr. Satterfield. Congressman, I simply can't comment on 
those reports.
    Mr. Clay. Is he telling the truth?
    Mr. Satterfield. Congressman, I have no personal knowledge 
of these allegations. I can't comment on them.
    Mr. Clay. I thank you.
    Thank you, Mr. Chairman.
    Chairman Tom Davis. Thank you.
    Ms. Watson.
    Ms. Watson. I think that the expenditures of funds for 
reconstruction in Iraq are the best example we send to this 
country, to the taxpayers, and to the world of waste, fraud and 
abuse. We have been in Iraq for 3 years. We are trying to 
rebuild it. And I am looking at Parsons, I am looking at 
Halliburton. They have been paid off. They cut-and-run indeed, 
and they get paid cost-plus. Why has it taken us 3 years, and 
maybe we are to blame, Mr. Chairman, for not having oversight.
    I was an ambassador. We had to report by cable to the 
Department of State almost on a daily basis. Our watch, if this 
kind of abuse occurred, we would have been out of there. I 
cannot understand the professionals sitting in front of us not 
giving us an outline on how we are going to correct it now. I 
find your answers to be really considering us as of low 
intelligence.
    I am just going to say it. I am so frustrated sitting here, 
because the costs of this war is almost $400 taxpayer dollars, 
and we keep giving contracts out to people who cannot do the 
job. I think that if you can't tell me who has lost a job, who 
has been demoted, who had to step down for faulty planning, 
then you ought to step down.
    I just want to say that our contracts and our 
reconstruction plans are opaque and with these no-bid and cost-
plus contracts, we are ripping the people of Iraq, who we are 
trying to model a democratic government, and the taxpayers of 
the United States.
    So I want some brave soul in the group to tell me what has 
been done constructively and what U.S. Government policies and 
procedures have been changed so that the chaos that has 
happened in Iraqi contracts will not happen again, and what 
Government officials, as I said before, have lost their jobs or 
been charged with crimes or malfeasance in regard to Iraqi 
contracting. Is there a brave soul among you that would like to 
respond?
    Mr. Bowen. Yes, ma'am. My office has 25 cases right now at 
the Department of Justice regarding wrongdoing. Five 
convictions have been attained from our investigations, four of 
them will be sentenced over the next few months. So I have 10 
investigators in Iraq now pursuing 90 other cases.
    And so yes, oversight is at work in Iraq, in Baghdad and 
across the country. I have 10 inspectors who virtually every 
week travel outside the Green Zone and bring back reports like 
this, like the Baghdad Police College. And so yes, oversight is 
there.
    Ms. Watson. Let me interrupt you for a minute. Would you 
send your response to Congresswoman Diane Watson, 125 Cannon, 
as soon as we finish this hearing? I would appreciate that in 
writing. Be sure there is a date on it and that you sign it.
    Mr. Bowen. Yes, ma'am.
    Ms. Watson. Because I am going to hold it up.
    I thank the Chair for having this hearing. We have to do 
more of it, because I have to go back to my district in Los 
Angeles and explain to them why we are spending the taxpayers' 
money the way we are as it relates to reconstruction. So I can 
hold your document up that we are catching the wrongdoers.
    Thank you so much for having the courage to respond to me.
    Mr. Bowen. I will get you that answer today.
    Ms. Watson. Thank you.
    Chairman Tom Davis. Make it available to the committee, 
too. I think we would all like to have it. Thank you very much.
    The gentleman from Maryland?
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Ms. Schinasi, I want to thank you for being here. GAO 
issued a report on Monday regarding contracts in Iraq. Although 
we don't have a Pentagon auditor here today, we do have your 
report which is based on auditors' findings. I would just like 
to ask you a few questions.
    First, the GAO found that the Pentagon auditors have now 
identified some $3.5 billion in questioned and unsupported 
costs under Iraq contracts. Is that right?
    Ms Schinasi. Yes, that is correct.
    Mr. Cummings. That is a stunning figure, and that is a much 
bigger figure than we have ever heard publicly. And your report 
discusses two types of charges. First, the auditors identified 
$2.1 billion in questioned costs. Is that right?
    Ms. Schinasi. Yes, that is correct.
    Mr. Cummings. The manual by the Pentagon auditors states 
that questioned costs are unreasonable costs in amount and 
exceed that which would be incurred by a prudent person. They 
recommend that these charges not be paid to the contractor. Is 
that right?
    Ms. Schinasi. Yes, sir.
    Mr. Cummings. Second, the auditors identify $1.4 billion in 
unsupported charges for which the contractor has not provided 
adequate documentation. Is that correct?
    Ms. Schinasi. Yes, sir.
    Mr. Cummings. Now, it seems, however, that the Pentagon 
isn't following the advice of its own auditors. Traditionally, 
the Pentagon upholds a majority of auditor findings and does 
not pay most questioned costs. Normally, the Pentagon refuses 
to pay contractors between 55 percent and 75 percent of the 
costs identified by auditors as questioned. They call this 
their sustention rate. Is that correct?
    Ms. Schinasi. Yes.
    Mr. Cummings. In your report, you identified some $386 
million withheld from contractors in response to auditor 
recommendations. Is that correct?
    Ms. Schinasi. Yes, it is.
    Mr. Cummings. That was out of $1.4 billion. Is that 
correct?
    Ms. Schinasi. Yes, sir.
    Mr. Cummings. Now, that means that the Pentagon followed 
its auditors' recommendations only 27.5 percent of the time, or 
half the normal rate. Is that correct?
    Ms. Schinasi. Yes.
    Mr. Cummings. And why is that?
    Ms. Schinasi. One of the reasons that we identify in the 
report is this issue of beginning work before we agree with the 
contract on what they are going to do and how much we are going 
to pay them. And so what we found was that the contracting 
officers to whom the auditors report believe that they did not 
have the flexibility to get back costs that already had been 
incurred by the contractor.
    Mr. Cummings. Have we done anything to correct that 
situation? Or is there anything that can be done?
    Ms. Schinasi. As far as I am aware, as long as we have the 
undefinitized contract issue that we have, unless we give those 
contracting officers different directions than they appear to 
have been given, we will continue to see the same kinds of 
sustention rates.
    Mr. Cummings. Now, I won't ask you to comment on the causes 
behind this, but if my math is correct, $386 million was 
withheld out of $1.4 billion in charges identified by the 
Pentagon auditors as questioned. You are doing additional work 
on this issue, I understand, for the committee. Is that right?
    Ms. Schinasi. Yes, sir, for the chairman and the ranking 
member.
    Mr. Cummings. OK. And will you be able to break out for us 
the biggest contracts and tell us how much the auditors 
questioned, how much they identified as unsupported, and how 
much was actually withheld from contractors? Will that be a 
part of your report?
    Ms. Schinasi. We believe we will be able to do that.
    Mr. Cummings. Now, Ms. Ballard, let me turn to you for a 
moment. As I said, the Pentagon historically has followed its 
auditors' recommendations between 55 percent and 75 percent of 
the time, but now GAO says that you are following those 
recommendations only 27 percent of the time. Is that right?
    Ms. Schinasi. That is what the report says.
    Mr. Cummings. I can't hear you. I am sorry.
    Ms. Schinasi. That is what the report says, yes, sir.
    Mr. Cummings. OK. Do you agree with it or don't you?
    Ms. Schinasi. Our policy is that the contracting officers 
are responsible for investigating the questioned costs raised 
by DCAA. In that process, they are supposed to either determine 
if those costs are allowable and allocable and reasonable, or 
they are supposed to disallow those costs. That is the policy 
that we have.
    Mr. Cummings. Well, in May 2005, the committee received a 
briefing from the Pentagon auditors. We were told at that time 
that under the LOGCAP contract, the largest contract in Iraq, 
they had identified $813 million in questioned costs and $382 
million in unsupported costs. Can you tell us today what the 
current figures are under the LOGCAP contract? And how much in 
questioned and unsupported costs have now been awarded to the 
contractor?
    Ms. Schinasi. I can tell you that today we have $468 
million----
    Mr. Cummings. I am sorry, Mr. Chairman, I can't hear.
    Ms. Schinasi. We have $468 million in questioned costs 
today.
    Mr. Cummings. And what is happening with regard to that?
    Ms. Schinasi. We are working to determine if those costs 
should be recognized or disallowed.
    Ms. Schinasi. When costs are disallowed, I mean, I notice 
that like in Maryland, there is something called debarment. In 
other words, you can't contract anymore, and there are small 
contractors that are looking at this, looking at us on C-SPAN 
right now and they are listening to all these billions of 
dollars, and figuring out where they are going, and they are 
being debarred for small numbers compared to this. I was 
wondering, do we have such a mechanism in regard to this?
    Ms. Schinasi. The regulation does specify the circumstances 
under which we debar contractors. Usually that occurs when 
there is a criminal act on the part of the contractor and we 
comply with the regulatory guidance in following the process to 
determine if a contractor should be debarred.
    Mr. Cummings. Have we debarred anybody with regard to Iraq?
    Ms. Schinasi. Not to my knowledge.
    [The prepared statement of Hon. Elijah E. Cummings 
follows:]

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    Chairman Tom Davis. OK. The gentleman's time has expired.
    Let me just take a couple more minutes on each side. Let me 
just ask Mrs. Schinasi, the way this works is the DCAA would 
come up and question costs, right, in their report?
    Ms. Schinasi. Yes.
    Chairman Tom Davis. And that doesn't mean they are not 
allowable. That really starts the conversation whether it is 
allowable?
    Ms. Schinasi. Yes, that is correct.
    Chairman Tom Davis. And then a settlement is reached. Is 
that correct?
    Ms. Schinasi. Yes, that is correct.
    Chairman Tom Davis. So a DCAA questioning the cost doesn't 
per se mean that they are now allowable. They look at 
documentation and oftentimes the contractor will come back and 
have to either further document or explain what happens. Is 
that correct?
    Ms. Schinasi. Yes, that is correct.
    Chairman Tom Davis. And we have asked you, have we not, to 
take a look at once this is done, and DCAA has questioned 
costs, and the contractors come in, and it is settled, we have 
asked you to come back and look at those settlements at the GAO 
and see if these settlements are within the ambit of what 
should be proper. Is that correct?
    Ms. Schinasi. Yes, and we are just starting that work now.
    Chairman Tom Davis. I just wanted to make that clear 
because questioning the cost doesn't equal unallowability or 
mean that anything is necessarily wrong. In fact, I did this 
for 20 years previously. Many times, it is DCAA's job to 
question these things, but many times the contractor comes back 
and can show for good cause that it is not necessarily 
unallowable and that it was in fact proper. Sometimes they 
don't, but we have asked you to look at those settlements so 
the committee can then get further details in terms of how 
these are carried out and that there is no favoritism and try 
to answer those questions.
    Mr. Van Hollen, I can give you a couple of minutes to 
followup. Thanks.
    Mr. Van Hollen. Thank you. Just a couple of things.
    First, I was asking some questions earlier, Mr. Shays, 
about the subcommittee hearing we had a while ago where we went 
over some of the contracts, the Halliburton contracts. At that 
time, you may recall that we asked for, we were thinking about 
getting a subpoena, but instead you gave them 2 weeks to 
respond. We haven't, for the record, heard anything back from 
any of the folks either with respect to the documents on these 
cases.
    Mr. Shays [presiding]. Let me do this. Let me research 
after the vote and tell you what we responded because I think 
the gentleman is primarily right, but let me fill in the 
details.
    Mr. Van Hollen. OK. I have the transcript from the hearing 
here, so I think we need to followup.
    Mr. Shays. Yes, we will followup.
    Mr. Van Hollen. If I could just ask a question of any of 
the panel. This is a followup on the questions of political 
cronyism and to what extent they infected our efforts and the 
choice of people that we sent over for the reconstruction 
period. In the Washington Post story, they talked about a 
specific issue dealing with the public health where they 
removed somebody and replaced him with a political appointee, 
essentially, named James Haveman. Mr. Haveman, according to the 
story, decided it was important to slash the list of drugs the 
Iraqi doctors could prescribe. In fact, a Navy pharmacist was 
brought in to come up with a new list, according to the story, 
and this Lieutenant Commander found that the existing list, 
``really wasn't that bad.'' And he told the Washington Post 
that Mr. Haveman and his advisors, ``really didn't know what 
they were doing.''
    Are any of you personally familiar with this particular 
case and could you comment on why this person was brought in? 
With USAID, Mr. Bever, was this someone who was brought in 
under UsAID contract?
    Mr. Bever. Absolutely not, sir.
    Mr. Van Hollen. The person who had been there was with 
USAID.
    Mr. Bever. Absolutely, yes, sir.
    Mr. Van Hollen. And for the record, the person who you had 
as your expert was removed. Is that correct?
    Mr. Bever. Absolutely, yes. He was highly qualified, with a 
master's in public health and a highly experienced health 
officer, sir, in conflict situations.
    Mr. Van Hollen. I'm sorry?
    Mr. Bever. In conflict situations.
    Mr. Van Hollen. Yes, and the highly experienced person was 
removed in favor of a political appointee. Is that right?
    Mr. Bever. I can't comment on that. I don't know the 
details of that, but we can get an answer for you. We will try.
    Mr. Van Hollen. If you could please provide the details 
about how the decision was made to remove the expert with long 
experience under conflict situations, and replace him with 
someone with no experience in this kind of situation.
    Mr. Shays. And you do agree that the person who came in did 
not have experience?
    Mr. Bever. I would have to research this more fully. I am 
generally aware of the press reports, but I have not seen the 
details and we want to make sure we have an accurate 
administration answer for you on this.
    Mr. Van Hollen. Thank you very much, Mr. Bever.
    Mr. Shays. Thank you.
    Mr. Bowen, I just want to make sure the record is clear. 
Whatever the record is, but when I constantly hear the 
reference to $9 billion missing, I am curious as to why you 
don't, or maybe you didn't feel you had the time, to share with 
us whether it is $9 billion missing, or whether it is an issue 
of billions missing, not $9 billion. My recollection is that 
dollars were given, say, to Generals to pay troops. They don't 
have a checking system, so dollars are given. Then the General 
gets those dollars and supposedly gives them to his troops.
    But the real issue is that we don't have a paper trail of 
that $9 billion. Is that right?
    Mr. Bowen. That is right. I didn't get a chance to finish 
the point on this, but we have discussed it at previous 
hearings that you chaired. The core issue is that there was a 
lack of sufficient controls to track how the money that was 
transferred from the CPA to that fledgling government of Iraq 
with ministries barely standing back up, and how they used that 
money. KPMG did audits on the Iraqi side. We just looked at 
what the U.S. controls were and they were inadequate.
    Mr. Shays. The U.S. controls were?
    Mr. Bowen. Yes.
    Mr. Shays. So we can't be certain of how much of the $9 
billion that we had control of originally actually got to the 
Iraqis?
    Mr. Bowen. We know it got to the Iraqis, but we don't know 
how it was used.
    Mr. Shays. But do we know, do we have a paper trail that 
says we gave certain dollars to certain Government officials.
    Mr. Bowen. Yes, we do.
    Mr. Shays. Mr. Satterfield, you can answer, too, yes.
    So the issue is, once it got into Iraqi hands, what 
happened to the $9 billion?
    Mr. Bowen. Right. Under UNSCA 1446, CPA was the de jure 
government of Iraq and had stewardship responsibilities, 
fiduciary I would venture to say, over the development fund for 
Iraq. Therefore, my criticism was fairly narrow. What was in 
place with respect to the transparency requirement was not 
sufficient to ensure full transparency.
    Mr. Shays. So the bottom line is, though, this was dollars 
that we ultimately had a responsibility for because we were 
``the occupying Nation.'' They had the $9 billion to spend on 
their own, and the challenge is there is no paper trail to know 
how the Iraqis spent their own $9 billion. Is that correct?
    Mr. Bowen. That is correct. And the key point that I 
continually make whenever this issue comes up is that we did 
not say it was lost, stolen, or misappropriated. The finding in 
the audit was that there were insufficient controls to account 
for its use and the anecdotal investigation that we did on the 
Iraqi side of the ledger raised concerns.
    Mr. Shays. I mean, huge concerns.
    Mr. Bowen. They were significant concerns, and indeed the 
corruption issue that Mr. Gutknecht addressed on the Iraqi side 
of the ledger is, while we don't draw the line, may be related 
to the fact that there was a very large sum of cash, all of it 
cash, transferred to fledgling ministries in 2003 and 2004.
    Mr. Shays. Do the Iraqis have a checking account system 
now?
    Mr. Bowen. They do not have electronic funds transfer, and 
that continues to burden the management of money in Iraq.
    Mr. Shays. Oh, it has to.
    Is there any comment that any of you would like to make 
before we get to the next panel? Any other comments?
    Let me thank you all for your service. I appreciate your 
being here today.
    We stand at recess until the next panel.
    Did you want to say something?
    Mr. Bowen. No. Thank you, Mr. Chairman.
    Mr. Shays. Thank you.
    [Recess.]
    Chairman Tom Davis [presiding].
    If we can get the witnesses in. Thank you for bearing with 
us. We have Mr. Earnest O. Robbins II, senior vice president of 
Parsons, I guess you drew the short straw today, and Cliff 
Mumm, the president of Bechtel Infrastructure Corp. Thank you 
for being with us.
    It is our policy we swear you in. You just raise your right 
hand.
    [Witnesses sworn.]
    Chairman Tom Davis. Thank you very much.
    Mr. Robbins, you can go first. I think you know the rules. 
We just appreciate your patience with us as we move through. 
Thank you.

STATEMENTS OF EARNEST O. ROBBINS II, SENIOR VICE PRESIDENT AND 
  MANAGER, INTERNATIONAL DIVISION, PARSONS INFRASTRUCTURE AND 
     TECHNOLOGY GROUP; AND CLIFF MUMM, PRESIDENT, BECHTEL 
                      INFRASTRUCTURE CORP.

               STATEMENT OF EARNEST O. ROBBINS II

    Mr. Robbins. Good afternoon, Mr. Chairman, members of the 
committee. I am Earnie Robbins, senior vice president of 
Parsons Infrastructure and Technology Group. I joined Parsons 3 
years ago, and I serve as the manager of our Infrastructure and 
Technology Group's International Division. Management of 
Parsons' Iraq reconstruction projects fall under my division.
    As you may be aware, the Coalition Provisional Authority 
divided the Iraqi reconstruction effort into six sectors. 
Parsons submitted proposals for several of those sectors, and 
in early 2004 was awarded design-build prime contracts in two 
of the six: security and justice, or S&J and buildings, 
education and health [BEH].
    Parsons understood there would be risk involved with these 
contracts, but many of the challenges could not have been 
foreseen. Before I explain the challenges and lessons that we 
have learned, let me first identify for you a few things that 
went right. I will focus on projects completed, our safety 
record, and our capacity-building contributions to the U.S. 
Government's reconstruction efforts.
    We repaired or rebuilt several large Iraqi ministry 
facilities and judicial facilities. We repaired and improved 12 
hospitals, constructed 119 border forts in far-flung, remote, 
often to the point of inaccessible locations. We built five 
border points of entry, constructed 54 fire stations, and even 
the public health clinic program, hospital renovations, prisons 
and the Baghdad Police Academy were on their way to having 
additional successes before the government issued termination 
notices.
    We are also proud that Parsons consistently achieved safety 
metrics that exceed the average for companies performing 
similar construction within the United States. In the process, 
we constantly stressed the need for personal and collective 
safety on hazardous constructionsites.
    Parsons successfully trained, educated and employed 
thousands of Iraqis. The Government required design-build prime 
contractors to provide measurable contributions to capacity 
building within the Iraqi private sector. This was defined as 
promoting the growth and modernization of the Iraqi engineering 
and construction sector. Parsons aggressively met our 
responsibilities in this area from the earliest stages of our 
arrival in Iraq. For every U.S. engineer or related 
professional we deployed to manage these contracts, we hired 
approximately four Iraqi engineers, architects, planners, 
accountants, inspectors, schedulers and so forth.
    At the high point of our presence in-country on these two 
contracts alone, we had 140 expatriate employees and 600 Iraqis 
working side by side with us. Through hands-on and classroom-
type training, we introduced Iraqis to contemporary engineering 
and management processes and techniques, including U.S. 
approaches to project safety, quality control, contract 
administration, finance, design procedures and standards.
    As noted by the Corps of Engineers and other Government 
agencies, the ability of some companies and individuals within 
the Iraqi engineering and construction community to absorb and 
particularly to apply Western ways of doing business proved to 
be problematic. The concepts of competitive contracting, 
transparent business practices, detailed documentation 
regarding invoices, and even rudimentary job-site safety were 
all alien to the majority of Iraqis we worked with.
    Add the issue of security due to the rising tide of 
terrorism and sectarianism to the formula and the desired 
results became increasingly difficult for anyone, either 
Parsons or the Government, to attain. Despite our recognized 
achievements in capacity-building, we encountered a shortage of 
capable Iraqi managers and skilled craftsmen. This was 
particularly challenging given the sheer number of 
reconstruction projects simultaneously conducted as requested 
by the Government.
    This leads me to a discussion of the challenges we did 
face. There were many unusual challenges, but I will mention 
three: sole definition of our contract scope; the impact of the 
deteriorating security situation; and the turnover among key 
Government staff.
    At the time of the contract award, the Government did not 
know precise scope of work or even where it wanted many of the 
facilities to be located, and thus neither party knew the exact 
site conditions and could not accurately predict costs and 
schedules. Key factors such as this are typically known, or at 
least better understood prior to contract bid, award and 
execution. As mentioned by the GAO member of the preceding 
panel, this disconnect between requirements and available 
funding was always obvious. In some cases, it took up to 15 
months for the Government to identify to Parsons what was to be 
built, where it was to be constructed, and what funding was 
available.
    Again, I believe the GAO statement this morning summarized 
the impact of this issue. The delay in definitizing task orders 
significantly impacted both costs and schedule. A description 
of the situation can be found in various of the Special 
Inspector General's reports, including report No. 2 dated July 
2006, in which the following statement is made: ``By law, 
undefinitized task orders must be definitized within 180 
days.'' The PMO/PCO usually did not meet this 180-day 
definitization deadline.
    Even when we thought the scope of a particular project was 
definitized, we often continued to struggle with constant 
changes and interpretations regarding our contractual 
requirements.
    The next challenge was security. As the Special IG has 
noted in previous reports, the presumption made by the 
Government and accepted by Parsons was that the security 
situation would be permissive. That environment simply did not 
materialize.
    One aspect of our contracts with the Government-established 
measure of merit was hiring subcontractors. Iraqi construction 
companies performed all of the actual construction work under 
our management and supervision. We awarded over 1,700 
subcontracts to Iraqi firms and at the peak of construction we 
had over 11,000 Iraqis employed on security and justice and 
medical projects. Even the day-to-day oversight of those Iraqi 
subcontractors was, as a result of cost and security concerns, 
conducted almost entirely by Iraqis hired and trained by 
Parsons.
    Our reliance on Iraqi construction firms, and even to some 
extent, our dependence on Iraqis to assist us in managing those 
subcontractors made us extremely vulnerable to adverse schedule 
and cost impacts as the security situation deteriorated.
    The third challenge I will address today was the well-
documented and constant turnover of U.S. Government managers. 
This resulted in an endless stream of changes in priorities, 
expectations, direction and procedures. The results of these 
frequent changes are discussed in several of the Inspector 
General's reports. I would categorize them as counterproductive 
at best.
    Finally, I want to address the inference made by some that 
Parsons walked away from the public healthcare clinics after 
completing only 20 of the 150 under contract. That is not 
accurate. The Government terminated us, our task orders for 
convenience. At that time, we had completed 20 of those PHCs 
with 35 additional clinics between 75 percent and 100 percent 
complete, and an additional 66 between 50 percent and 75 
percent constructed. Parsons fully intended and wanted to 
complete those projects, but the Government apparently decided 
it could complete them faster and cheaper by other means.
    In summary, we are proud of the role Parsons has played in 
assisting the U.S. Government and the Iraqi people in the 
reconstruction effort. The men and women who work for Parsons 
and for many other contractors present in Iraq have endured the 
daily danger, family separation, and lack of personal comfort 
and convenience that come with working in a combat zone, and 
they have for the most part received little credit or 
appreciation for doing so. When the final stories of the Iraq 
reconstruction are told, their efforts will hopefully be more 
objectively recognized and appreciated.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Robbins follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    
    Chairman Tom Davis. Thank you very much, Mr. Robbins.
    Mr. Mumm.

                    STATEMENT OF CLIFF MUMM

    Mr. Mumm. Good afternoon, Mr. Chairman and members, and 
thank you for this opportunity to appear before this committee.
    My name is Cliff Mumm. From April 2003 through December 
2004, I was the chief of party of the USAID Iraq Reconstruction 
Project. During that period, I lived in Iraq. I lived and slept 
in Iraq. I maintain ongoing executive responsibility for the 
USAID-Bechtel work in Iraq and I continue to travel back and 
forth to Iraq frequently.
    Bechtel won two competitive contracts from USAID to cover 
the restoration of essential power, water, civil and 
telecommunications infrastructure. It did not, neither of the 
contracts, included oil or gas sectors. Under my direction, 
Bechtel delivered its first team to the region within 3 days of 
winning the contract.
    One of our first priorities, and in those days you could 
travel because the security situation was such that it allowed 
it, was to crisscross the country and assess the state of 
Iraq's infrastructure so USAID and the U.S. Government could 
make a determination of the highest priority needs.
    In addition to war damage, our teams discovered that many 
critical facilities such as water treatment and power plants, 
had been wrecked by years of neglect, looting, and ministry 
mismanagement. Our assessment concluded that approximately $15 
billion was needed to bring that country up to some regional 
standard. Given the country's vast needs, no one expected that 
our contracts, which totaled $2.3 billion, could complete the 
job. The work under those contracts could and did, however, 
provide a platform upon which the Iraqis could build and 
sustain themselves.
    To help get the country back on its feet, we used Iraqi 
contractors every place we could. In fact, we awarded to Iraqi 
contractors three-quarters of our work, and anyplace we didn't 
award to Iraqi contractors, such as power suppliers, we 
required in their contract that they award to Iraqi 
contractors. At peak, our work employed 40,000 Iraqis across 
the country.
    Among other accomplishments, we dredged and refurbished 
Iraq's only deepwater port of Umm Qasr, which hadn't been 
opened since the Iran-Iraq War. We restored the bulk of Iraq's 
water treatment and sewage treatment capacity, which is capable 
of serving millions of people. Our work in the power sector 
increased capacity by more than 1,200 megawatts.
    Hundreds of thousands of Iraqi children were able to attend 
classes in 2003 in more than 1,200 schools we refurbished. We 
repaired three major bridges for humanitarian and commercial 
traffic, and we also restored the national telecommunications 
grid.
    One of our most important contributions was in 
institutional strengthening. More than 600,000 hours of 
training programs were provided by Bechtel, which improved 
Iraqi skills in plant operations, in plant safety, construction 
management, and information technology.
    The security environment we encountered in Iraq was 
profoundly difficult. Armed insurgents stop at nothing to 
sabotage major infrastructures. Key Iraqi operating staff are 
often forced to abandon their posts in the face of murder and 
kidnaping. And power generation is often stranded when fuel 
pipelines are blown up or transmission lines cut.
    In the case of the Basrah Children's Hospital, escalating 
violence frequently made work impossible. In May 2006 alone, 85 
people were murdered in Basrah, including nine British 
soldiers. Iraq's Prime Minister declared a state of emergency 
in the city and that state continues to today.
    In the face of all of this, our team still managed to 
complete the essential civil and structural work for the 
hospital, leaving it in the good condition that it is today for 
future consideration.
    We are proud of the work we did in Iraq on behalf of the 
American and the Iraqi people. We are also proud of our own 
people, including the over 600 professional Iraqi colleagues. 
USAID has attested that Bechtel performed exceptionally well 
under extremely difficult circumstances.
    I am honored to share my experience with you this morning, 
and look forward to questions.
    Thank you.
    [The prepared statement of Mr. Mumm follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    
    Chairman Tom Davis. Thank you both very much.
    I am going to start Mr. Robbins off. I will start with you 
on the Academy. Your firm had the contract for construction of 
the Baghdad Police College. Of course, when we asked you here, 
this wasn't even on the agenda, but the report got, so I have 
to ask you. It was the subject of today's Special Inspector 
General's Report.
    I understand that much of the work in question was actually 
performed by a subcontractor, but your firm had the overall 
responsibility for the project. What is the explanation?
    Mr. Robbins. Mr. Chairman, in fact we had 13 Iraqi 
subcontractors working on this complex.
    Chairman Tom Davis. Well, you saw the report. This isn't 
the type of work that Parsons has traditionally been associated 
with. That is fair to say, isn't it?
    Mr. Robbins. No, it is not. The buildings in question, the 
cadet barracks, were all completed in the April-May timeframe 
of 2006. They were inspected and the quality control was done 
by Parsons, with quality assurance by the Corps, both of whom 
signed off on the facilities as being completed. The plumbing 
systems which have caused this problem were pressure-tested 
according to standard.
    Chairman Tom Davis. Who tested them?
    Mr. Robbins. We had independent labs and our own engineers. 
There is a normal test that you conduct on a pressurized drain 
system.
    Chairman Tom Davis. But there is no city inspectors or 
Federal Government inspectors that come out?
    Mr. Robbins. Other than the Corps QA person that was there 
and witnessed the test, along with the Parsons person----
    Chairman Tom Davis. So the Army Corps was there to witness 
the test?
    Mr. Robbins. Yes, they were.
    Chairman Tom Davis. And basically did they approve who you 
had testing it and everything else?
    Mr. Robbins. Yes, they did.
    Chairman Tom Davis. So the Corps was overseeing this?
    Mr. Robbins. The test results were published and approved. 
The buildings were accepted. Again, this was in the late April, 
early May timeframe. And Parsons was essentially complete then. 
We turned the buildings over to the government.
    Chairman Tom Davis. And you got paid?
    Mr. Robbins. Well, we are still getting paid, but yes, sir. 
We submitted invoices and that continues as subcontractor 
invoices come in.
    About the first week of July, we were notified by the Corps 
that there was a problem with the plumbing in these facilities 
and even though, again, our contract was completed, they asked 
us if we would send our engineers out to assess the issue, and 
we did. We dispatched a couple of our engineers from the IZ, 
the International Zone, to look at it. They discovered this 
workmanship issue. There was no question. You are right. This 
is not correct.
    We, with the Corps, got the subcontractor who had performed 
the work to come back.
    Chairman Tom Davis. Had this subcontractor done previous 
work for you?
    Mr. Robbins. This was the only subcontract that he had with 
us, was for these barracks.
    Chairman Tom Davis. OK. This was an Iraqi contractor?
    Mr. Robbins. Yes, it is an Iraqi subcontractor.
    Chairman Tom Davis. It wasn't Halliburton?
    Mr. Robbins. Oh, no, sir.
    Chairman Tom Davis. OK. I just wanted to take that off the 
table.
    Mr. Robbins. As I said earlier, all of our subcontracts 
were with Iraqi firms for construction.
    Chairman Tom Davis. OK.
    Mr. Robbins. And we had withheld payment on that sub until 
some time had passed, and the warranty on the work was in fact 
passed to the Corps down to the Iraqi Police Academy 
administration to enforce the warranty. So they called the 
company, the subcontractor, back in. And as the IG report 
notes, the Iraqi subcontractor is in fact replacing all of the, 
it is not substandard plumbing, it is substandard installation. 
So the entire plumbing network for those barracks is being 
replaced.
    Chairman Tom Davis. Now, you heard Mr. Bowen say that they 
had 13 out of 14 contracts they had looked through, that your 
work was basically inadequate. At 14, you talked about the 
termination for convenience, and frankly he didn't go after 
that contract. He didn't get into that.
    Mr. Robbins. Right.
    Chairman Tom Davis. What is going on here? What is your 
explanation?
    Mr. Robbins. I was not able to take the notes fast enough 
on which 13 sites he visited, but I recall he said he visited, 
for example, 5 border forts, and I think we did 119. I 
mentioned how remote they were. What he said was that the 
construction was substandard. Each of those facilities was 
completed by Parsons' subcontractors. Inspections were 
conducted by us and by the Corps and the buildings were all 
accepted as complete and in compliance with the contract in 
terms of materials and workmanship.
    Chairman Tom Davis. By the Corps of Engineers?
    Mr. Robbins. By the Corps. Now, I don't know without seeing 
exactly what Mr. Bowen is talking about what kind of issues 
there were on those border forts.
    Chairman Tom Davis. Right.
    Mr. Robbins. But I have also heard this morning quite a bit 
of discussion about expectations from Iraqi subs. I would 
suspect that it is safe to say the further you get from the 
large cities, industrial areas, the less likely you are to find 
any skilled craftsman to do work. And subcontracts, in Iraq I 
think it is safe to say all contracts is local. You deal with 
the firms that are there. These were all competitively bid. 
Tenders were put out on the market in the Iraqi market.
    Chairman Tom Davis. Was your contract competitively bid as 
well?
    Mr. Robbins. Yes, sir.
    Chairman Tom Davis. OK, so you beat out other companies to 
be able to do this.
    Mr. Robbins. That is correct.
    Chairman Tom Davis. Well, I mean, you saw the pictures. A 
picture is worth 1,000 words, and I don't need to sit here and 
walk through it, but this has to be corrected. The fact that 
they went back and looked at 13 out of 14 projects they 
inspected were substandard tells us there is a problem. I think 
the Corps of Engineers will be called up appropriately, but I 
also think, if you look at that as the contractor in charge of 
that, that there is a problem here that we are going to have to 
take a look at obviously. I am sure you are going to have 
auditors crawling all over as we move this through.
    Mr. Robbins. Yes, sir.
    Chairman Tom Davis. Mr. Waxman.
    Mr. Waxman. I am going to let Mr. Van Hollen go ahead.
    Chairman Tom Davis. Mr. Van Hollen.
    Mr. Van Hollen. Thank you, Mr. Chairman. I would like to 
followup on some of the questions regarding the Police Academy, 
because as I understand it, you signed off, Parsons signed off 
on the project. Right?
    Mr. Robbins. That is correct.
    Mr. Van Hollen. It is a simple question. How could you sign 
off on a project, or how could it be that the tests conducted 
did not reveal the huge problems we see? I mean, how can any 
reasonable test designed to determine whether or not this is 
ready for the purposes it was designed for, not reveal these 
massive, massive problems?
    Mr. Robbins. Sir, the tests were conducted. The systems 
passed the test and were signed off by our inspectors and the 
Corps. I can't address why the tests, which were conducted 
according to standard methodology, failed to detect these 
fittings. I have some conjecture, that is all it would be, and 
that is, it took a while of use for this to manifest itself, 
for the fittings to come loose or whatever.
    That is purely conjecture, but to me it is the most 
explainable explanation.
    Mr. Van Hollen. How much was Parsons paid for the Police 
Academy project?
    Mr. Robbins. Our definitized final agreed-on costs for the 
entire program was about $72 million.
    Mr. Van Hollen. About $72 million?
    Mr. Robbins. Yes, sir.
    Mr. Van Hollen. And how much profit did Parsons make on 
this project?
    Mr. Robbins. Sir, all of our Iraq contracts, the two 
design-build contracts, had a 3 percent base fee and a 12 
percent award fee associated with them. The 3 percent base fee 
applied primarily to labor and some other direct costs. It did 
not apply to others, such as security, life support.
    Mr. Van Hollen. So 3 percent on top of costs, and then 12 
percent?
    Mr. Robbins. And then 12 percent award fee based on the 
Government's evaluation of our performance.
    Mr. Van Hollen. So what was the amount of that award fee, 
the 12 percent?
    Mr. Robbins. Well, there are different periods, so the 
first period covered part of when we were doing the design. 
What I will tell you, on the period in question, our award fee 
was zero.
    Mr. Van Hollen. What was the cumulative award fee?
    Mr. Robbins. Sir, I really don't know.
    Mr. Van Hollen. Can you get that for the record? Look, I 
mean, that is a question here. The question I think the 
American people would be asking, my constituents would be 
asking is how is it that a job that clearly turned into this 
kind of disaster, how is it that the Federal Government would 
actually pay the money? Is this something that you are going to 
go in, and are you going to return the money? What is the 
recourse for the taxpayer in these circumstances? Don't you 
think that Parsons, given what has turned out to be a very 
shoddy job, should return some of its profits to the taxpayer?
    Mr. Robbins. Sir, I will merely say that Parsons will abide 
by the terms of the contract and we will deal with the 
Government on a fair basis, and we will abide by whatever the 
decision is.
    Mr. Van Hollen. So you won't voluntarily look at this and 
say, given what has happened in this project, we will return 
the profit.
    Mr. Robbins. No, sir, I will not.
    Mr. Van Hollen. Do you think this was a job well done?
    Mr. Robbins. I think parts of it and a lot of it was well 
done, yes, sir.
    Mr. Van Hollen. Do you think the taxpayer got a good return 
on its investment for this project?
    Mr. Robbins. I think the taxpayers got what our contract 
called for it to get.
    Mr. Van Hollen. I am sorry, but you think that this is what 
the contract called for?
    Mr. Robbins. No, sir. And that is why we are repairing it 
at no cost to the Government. It is being repaired at no cost 
to the Government. We have warranties on construction. There 
are no construction bonds in Iraq. And so the situation is 
being remedied.
    Mr. Van Hollen. The cost-plus feature of these contracts 
provides no incentive to the contractor to keep down costs. Is 
that right?
    Mr. Robbins. No, sir. It provides every incentive, I 
believe, to the contractor to keep costs down.
    Mr. Van Hollen. I thought I understood your testimony to be 
you got paid 3 percent on top of costs.
    Mr. Robbins. Yes, sir. I would suggest that 3 percent is 
not particularly a very good return on investment. In fact, the 
reason for the award fee is to in fact incentivize you to do 
your best and to be recognized for doing that. The Government 
determines the amount of that award fee.
    Mr. Van Hollen. OK. Just sticking to the cost-plus, I mean, 
3 percent of a bigger number is going to be a bigger number, 
right?
    Mr. Robbins. That is correct.
    Mr. Van Hollen. So I mean, there is no incentive in that 
system to keep to costs.
    Mr. Robbins. Well, actually there is because of the 
definitized costs. You are paid your base fee based on a 
definitized cost. Any growth after that, there is no fee paid.
    Mr. Van Hollen. OK. I will just close. So what were the 
criteria that the U.S. Government used to determine that you 
got the 12 percent award fee?
    Mr. Robbins. Sir, it changed about four times over the 
course of the last 2 years, but it was everything from how well 
we did the capacity-building aspects of it. There are safety 
features. There are quality issues. There are schedule metrics. 
There is a whole litany of measurement that the Government uses 
to determine the award fee.
    Mr. Van Hollen. OK.
    Chairman Tom Davis. Mr. Waxman.
    Mr. Waxman. Thank you, Mr. Chairman.
    In August 2004, Bechtel was tasked with building a state-
of-the-art children's hospital in Basrah. The hospital was 
supposed to be finished by the end of 2005 at a cost of $50 
million. By March 2006, however, the expected completion date 
had slipped by 19 months and the expected cost had grown to $98 
million. As a result of the schedule delays and cost overruns, 
USAID took Bechtel off the project in June, and the Army Corps 
of Engineers contracted directly with Bechtel's Jordanian 
subcontractor, MidCon, in September. I have a copy of the Corps 
of Engineers' justification and approval document. Mr. 
Chairman, I would like to place this document in the record.
    [The information referred to follows:]

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    Chairman Tom Davis. Without objection.
    Mr. Waxman. In this document, the Corps explains why it 
decided to take Bechtel out of the loop. The document notes 
that Bechtel ``employees state they were unable to visit the 
project from October 2005 to March 2006.'' Mr. Mumm, is that 
true? Were Bechtel employees unable to visit the 
constructionsite for 6 months?
    Mr. Mumm. I can't speak to whether or not those months are 
exactly right, but I think that what is important to understand 
about the Basrah Children's Hospital is, first, we were not 
taken off by USAID. I will come to that in a moment. In fact, 
what you have to do if you think about Basrah, if I think about 
the Basrah Children Hospital or Iraq in general, is one has to 
think about kind of the security environment.
    There is nothing more in Iraq that affects both schedule 
and costs than security. It is both a direct cost and an 
indirect cost.
    Mr. Waxman. I understand the security concerns, but the 
Government was paying your firm to oversee your subcontractors. 
How could Bechtel provide adequate oversight if its employees 
were not present at the site for 6 months, is the figure we 
have? This Army document refers to Bechtel's failure to perform 
contractually mandated oversight. Do you disagree with the 
Corps of Engineers that Bechtel failed to perform required 
oversight?
    Mr. Mumm. Yes, in fact we provided the oversight and in 
fact, if you talk to the Corps of Engineers, what you will see 
is that we did in fact provide a facility, a structure, the 
civil and structural work completed in a quality manner. They 
will tell you that.
    Mr. Waxman. Well, this document from the Department of Army 
says the U.S. Army's intent to award this contract to MidCon is 
occasioned by the U.S. Agency for International Development's 
decision to stop work on the BCH construction project under its 
2004 contract with Bechtel. MidCon was BNI's construction 
subcontractor on this project. And the justification was the 
inattentiveness to oversight. It states that Bechtel failed to 
pay MidCon progress payments in a timely manner. Is that 
accurate?
    Mr. Mumm. We paid MidCon in a timely manner, but we did not 
pay MidCon for things that MidCon had not completed. I was part 
of that, Congressman, and was back and forth to Jordan and to 
Iraq talking to MidCon at every level, trying to get MidCon to 
continue performing.
    I want to go back to the security issue just a moment, if I 
could.
    Mr. Waxman. No, I don't want you to because I have some 
questions. If we have time, I want you to go further into it. 
But if Bechtel wasn't actually building the hospital, and the 
question is whether you were overseeing the Jordanian company 
that was doing the construction, and the claim is that you 
weren't paying that company on time, why were we paying 
Bechtel? Wouldn't the Government have been better off to 
contract directly with the Jordanian subcontractor earlier than 
it did?
    Mr. Mumm. The Government actually, I don't know if they are 
or not, going to contract with MidCon. MidCon is reluctant to 
continue. So I am not sure about the document, Congressman 
Waxman, that you are talking about. I have not seen it. 
However, the reason we left the project, or are leaving the 
project and turning it over to the Corps of Engineers, is 
because there is a real question about whether or not, now that 
the project is in a stable condition, that is the civil and 
structural work are completed on it, whether or not it should 
continue, or whether it should sit in abeyance for a period of 
time, not costing more blood and more money.
    We did provide absolute oversight and the quality of the 
work, and maybe this could be part of the record, the quality 
of the work will absolutely substantiate that this is a quality 
installation. Twenty-four people, Representative Waxman, 24 
people died getting it to that place.
    Our contract ends, period, ends at the end of October.
    Mr. Waxman. Mr. Mumm, you have to----
    Mr. Mumm. OK. I am just keyed up. I am sorry. I am not 
trying to be rude.
    Mr. Waxman. As you can see, I have a red light and that 
means I have a limit on time, and sometimes the witnesses like 
to get keyed up and run our time out.
    Mr. Mumm. Sorry.
    Mr. Waxman. But this document is from the Department of the 
Army, and we will certainly make it available to you. I am 
surprised you haven't seen it, but it is their document of why 
they decided to abandon you and go to MidCon. You are saying 
you did a good job. They say you didn't. I would like to see 
that document and I see no reason why we shouldn't put it in 
the record.
    How much profit did Bechtel make off this project? If you 
can give me that answer quickly?
    Mr. Mumm. One is, we weren't working for the Department of 
the Army, sir. They didn't make a decision about whether or not 
to remove us from the project. We instigated the idea.
    Mr. Waxman. How much profit did you make?
    Mr. Mumm. Our profit was not tied to either the cost or the 
days or the schedule of that particular hospital.
    Mr. Waxman. If you don't have a number, please get it for 
me for the record.
    Mr. Mumm. We don't have one tied to that. I'm sorry.
    Mr. Waxman. OK.
    Mr. Mumm. Our profit is actually a line item, and it is not 
tied to the contract.
    Mr. Waxman. It is a line item in the appropriations?
    Mr. Mumm. Yes.
    Mr. Waxman. This children's hospital was supposed to be a 
model for Iraq's reconstruction. Instead, it has been a 
disaster, with cost overruns, schedule delays and absence of 
oversight. Just in my mind, I have to tell you, there is no 
wonder this reconstruction is failing. This is what the Iraqi 
people see, these kinds of projects, these kinds of problems.
    Mr. Mumm. What the Iraqi people will see is a quality 
installation. The Iraqis themselves are afraid to go there and 
work on this installation. Again, I will reiterate, 24 people 
died. Our own site security manager was murdered. Our site 
engineer's daughter was kidnaped and he was forced to go. Our 
site manager was threatened by two different militia groups. 
They summarily marched out our electrical mechanical contractor 
and murdered 12 of them. And you probably saw in the press a 
few months ago where they took our concrete supplier on one 
Saturday, the subcontractor providing the concrete and 
installing it, they took him out, marched him out and executed 
11 of them.
    Under those circumstances, what we did in reaction to that 
was focus very hard on bringing this hospital in, and we 
accomplished that before our contract finished to a very stable 
state, and then in a very transparent way, went to USAID and 
suggested that they take a look at how we go forward with the 
hospital, which they did. And the decision was made, since our 
contract was ending, that we would turn that work over to the 
Corps of Engineers and we have done exactly that.
    We have one project that we have not finished in Iraq, and 
that is it.
    Mr. Waxman. OK. I am sorry for the losses of people and the 
difficulties. It is difficult in Iraq.
    Mr. Mumm. It is profoundly difficult.
    Mr. Waxman. Many people have suffered as a result. I want 
to look at your document. I know what the Army said. It is a 
question that I think we have to evaluate and I want to do it 
in a fair way.
    Thank you.
    Chairman Tom Davis. Let me just wrap up, both for Mr. 
Robbins and Mr. Mumm. How do we stop the kind of problems that 
we had at the Police Academy? What is the best way to ensure 
they don't occur? If we can't look to the contractor to produce 
the result, where are we supposed to look?
    Mr. Robbins. A very valid question, Mr. Chairman. I think 
for one thing it goes back to a point that was made I think by 
the GAO witness this morning about requirements and resources, 
and I would add time to that. The pressures on all the 
contractors to complete these projects in time periods far less 
than it would take to do this kind of work in the United 
States, let alone when, as Mr. Mumm has so well articulated, 
and it is true for us as well, when your subcontractors are 
being intimidated. There is no real rule of law to govern 
business practices in the country. The amount of oversight is 
probably much greater, not probably, it is definitely much 
greater than the Government wants to allow, and in this case, 
than the Government can guarantee us free access to the job 
sites.
    Chairman Tom Davis. How many employees have you lost in 
Iraq?
    Mr. Robbins. Fortunately, we have lost none of our U.S. 
employees. What we have lost, and I don't have an exact count, 
but I would guess across all of our contracts, at least two 
dozen Iraqi subcontractor employees. Typically, they are Iraqi 
citizens.
    Chairman Tom Davis. Mr. Mumm, how many have you lost?
    Mr. Mumm. We have lost people and casualties associated 
with our work are something about 101. Of those 52 died.
    Chairman Tom Davis. OK. So it is tough doing business over 
there, obviously.
    Mr. Mumm. I'm sorry?
    Chairman Tom Davis. It is obviously very, very difficult 
doing business there, getting continuity, getting workers.
    Mr. Mumm. It is difficult doing business there, but we did. 
We went in. We said what we were going to do with USAID. We had 
99 jobs orders and we did every one of them, and we did it in a 
way that sustained, and we have provided a platform for the 
Iraqi people that they could build on if they had a stable 
environment going forward. We are absolutely proud of what we 
did, and there is no quality issue.
    Chairman Tom Davis. Given the difficulties that you have 
had, do you regret doing business in Iraq?
    Mr. Mumm. I'm sorry?
    Chairman Tom Davis. Do you regret doing business in Iraq in 
retrospect? Or would you do the same thing over again?
    Mr. Mumm. You know, I wish I could tell you. I have lived 
and breathed Iraq for all these years since after the invasion. 
I wish I could tell you how emotional I get about this, or just 
even coming to this hearing today, all the people that wrote to 
me and said, tell them this, tell them that. All of us feel 
attached to the Iraqis and to the people there and to the 
things we did, and we wanted this to work. You cannot imagine 
the imperative that we felt, the sense of urgency, or the 
emotional investment and the tearful farewells that we have. 
Absolutely, I don't regret it.
    Chairman Tom Davis. Who paid for the security forces for 
your workers? Did you have to handle that yourself, or were 
those passed through in the contracts?
    Mr. Mumm. It was passed through in the contract, but we 
managed it ourselves.
    Chairman Tom Davis. How about you, Mr. Robbins?
    Mr. Robbins. Sir, on our constructionsites, we actually 
made site security the responsibility of the Iraqi construction 
firm that was doing the work. So our security costs reflected 
only the cost of protection and transportation for our 
expatriate employees in the Green Zone, and then as they would 
travel to a job site.
    Chairman Tom Davis. And you understood, Mr. Robbins, when 
you took this contract that you would be hiring Iraqis to do 
most of the work. Wasn't that part of the policy?
    Mr. Robbins. Absolutely.
    Chairman Tom Davis. Let me ask you both, what kind of 
quality have you had out of the Iraqi workers and the 
subcontractors? I am going to ask you the same thing, Mr. Mumm.
    Mr. Robbins. First of all, on the one hand, we have 600 
Iraqis working side by side with Parsons. So these were people 
that were actually helping us administer and manage the 
contracts. When you get 600 people, you will have a lot of good 
ones and maybe a few not so good. The not so good ones you try 
to bring along, and if they don't work out, you dismiss them.
    But I would echo Mr. Mumm's comments about the dedication 
and sincerity and hard work, the ethic that these people went 
through every day just to get to work was mind-boggling. They 
would have to take a circuitous route, different forms of 
transportation, then go stand in line at the gate at the Green 
Zone, at the International Zone, which is the most vulnerable 
place you could possibly be. You are a target waiting to go 
through all the detection and inspection necessarily conducted 
by the U.S. forces guarding it. On the other hand, the 
subcontractors, when you have 1,700 Iraqi subcontractors, 
you're going to have some good ones and you are going to have 
some bad ones.
    Chairman Tom Davis. Did you have any problems, either one 
of you, in people that you hired or had access to your sites, 
of people trying to set it back, blowing it up, or anything 
else? Any problems with that?
    Mr. Robbins. You mean sabotage of our work?
    Chairman Tom Davis. Sabotage.
    Mr. Robbins. We did, yes, sir.
    Chairman Tom Davis. You did.
    Mr. Mumm. We had no problems with that. We actually 
instituted this in Iraq. We were the first ones in and we 
realized we had to go local and go deep, just from all the 
years that I have spent in the Middle East and Bechtel has. But 
institutional strength is an important thing. You can bring 
people on that are bright and energetic, but you need to teach 
them how to do it the right way, get process and procedure. 
People don't like that, but you have to get process and 
procedure in place, and they respond to it. And the Iraqis 
absolutely responded to it. They are so good that where we can, 
we are trying to put Iraqis on other work that we have in other 
places. They are just an outstanding group of people, and no 
sabotage.
    Chairman Tom Davis. Maybe you ought to share your list with 
Mr. Robbins and his group as they go through.
    Mr. Mumm. Well, we are very covetous of our people. We hang 
on to them.
    Chairman Tom Davis. Mr. Waxman.
    Mr. Waxman. Mr. Chairman, I am moved by the statements that 
have been made, how difficult it has been for the contractors 
in Iraq. But I have to put it somewhat in perspective with 
Parsons, when we are told that 13 out of the 14 projects were 
not successful, and the 14th was canceled. We are talking about 
these two projects today. If those were the only ones, that 
would be one thing, but when you have so many others.
    If we are spending billions of dollars and we don't get 
anything for that money, we don't get anything that is 
worthwhile and lasting, it is a waste of money. In Mr. Mumm's 
cases, for his firm, it was also a waste of many lives.
    Now, we are looking at an Iraq that seems to be moving fast 
to a civil war. If we have had problems up to now, I can't 
imagine the problems are going to get any easier. No doubt the 
Iraqi people are looking to find out why we are there, and if 
we are there to help them be more secure and get on their feet, 
I don't think we can be judged successful in that regard if we 
find more and more projects not getting completed.
    In fact, I worry about the Police Academy being a symbol 
for the failure of this country in Iraq. I worry about our 
failures in the health sector to be a reminder to people in 
Iraq that we haven't added to their well being. And their 
electricity and the drinking water, and other things that 
people want and expect, and don't have on a regular basis, are 
a reminder to them that we haven't given them what they wanted, 
other than for most of them, maybe most, or certainly many of 
them, we got rid of Saddam Hussein, but they want a better 
life.
    So I thank you for this hearing. I think it has been 
worthwhile. My sympathies go to all the people that are trying 
under such difficult circumstances, not just the contractors we 
hired and then had to pay for their security, and that still 
wasn't enough, but for all the men and women we sent there who 
didn't get paid as much as the contractors and subcontractors, 
but in many cases are going to have to live with the injuries 
for the rest of their lives, their psychological trauma, and of 
course, for those who are gone, the families trying to 
understand the loss in their lives.
    That is the only comment I wanted to make.
    Thank you, Mr. Chairman.
    Chairman Tom Davis. I want to thank you for being here 
today, for being patient with us.
    The hearing is adjourned.
    [Whereupon, at 1:50 p.m., the meeting was adjourned.]
    [The prepared statements of Hon. Jon C. Porter and Hon. 
Stephen F. Lynch, and additional information submitted for the 
hearing record follows:]

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