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




 
                        A NEW ASSESSMENT OF IRAQ

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

                                HEARING

                               before the

                   SUBCOMMITTEE ON NATIONAL SECURITY,
                  EMERGING THREATS, AND INTERNATIONAL
                               RELATIONS

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 25, 2006

                               __________

                           Serial No. 109-200

                               __________

       Printed for the use of the Committee on Government Reform


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
                      http://www.house.gov/reform


                                 ______

                    U.S. GOVERNMENT PRINTING OFFICE
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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)
------ ------

                      David Marin, Staff Director
                Lawrence Halloran, Deputy Staff Director
                       Teresa Austin, Chief Clerk
          Phil Barnett, Minority Chief of Staff/Chief Counsel

Subcommittee on National Security, Emerging Threats, and International 
                               Relations

                CHRISTOPHER SHAYS, Connecticut, Chairman
KENNY MARCHANT, Texas                DENNIS J. KUCINICH, Ohio
DAN BURTON, Indiana                  TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida         BERNARD SANDERS, Vermont
JOHN M. McHUGH, New York             CAROLYN B. MALONEY, New York
STEVEN C. LaTOURETTE, Ohio           CHRIS VAN HOLLEN, Maryland
TODD RUSSELL PLATTS, Pennsylvania    LINDA T. SANCHEZ, California
JOHN J. DUNCAN, Jr., Tennessee       C.A. DUTCH RUPPERSBERGER, Maryland
MICHAEL R. TURNER, Ohio              STEPHEN F. LYNCH, Massachusetts
JON C. PORTER, Nevada                BRIAN HIGGINS, New York
CHARLES W. DENT, Pennsylvania

                               Ex Officio

TOM DAVIS, Virginia                  HENRY A. WAXMAN, California
              R. Nicholas Palarino, Ph.D., Staff Director
                        Robert A. Briggs, Clerk
             Andrew Su, Minority Professional Staff Member


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on April 25, 2006...................................     1
Statement of:
    Walker, David M., Comptroller General, U.S. Government 
      Accountability Office, accompanied by Joseph Christoff.....    31
Letters, statements, etc., submitted for the record by:
    Shays, Hon. Christopher, a Representative in Congress from 
      the State of Connecticut, prepared statement of............     3
    Walker, David M., Comptroller General, U.S. Government 
      Accountability Office:
        Information concerning Iraq contracting..................    92
        Prepared statement of....................................    34
    Waxman, Hon. Henry A., a Representative in Congress from the 
      State of California:
        Minority staff report....................................     7
        New York Times article...................................    23


                        A NEW ASSESSMENT OF IRAQ

                              ----------                              


                        TUESDAY, APRIL 25, 2006

                  House of Representatives,
       Subcommittee on National Security, Emerging 
              Threats, and International Relations,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:02 a.m., in 
room 2154, Rayburn House Office Building, Hon. Christopher 
Shays (chairman of the subcommittee) presiding.
    Present: Representatives Shays, Waxman, Van Hollen, and 
Ruppersberger.
    Staff present: J. Vincent Chase, chief investigator; R. 
Nicholas Palarino, Ph.D., staff director; Robert A. Briggs, 
analyst; Marc LaRoche, intern; Phil Barnett, minority staff 
director/chief counsel; Karen Lightfoot, minority 
communications director/senior policy advisor; Jeff Baran, 
minority counsel; David Rapallo, minority chief investigative 
counsel; Andrew Su, minority professional staff member; Earley 
Green, minority chief clerk; and Jean Gosa, minority assistant 
clerk.
    Mr. Shays. The quorum being present, the Subcommittee on 
National Security, Emerging Threats, and International 
Relations hearing entitled, ``A New Assessment of Iraq,'' is 
called to order.
    The selection of a prime minister offers hope Iraq will 
continue on the path toward a representative government, 
diminished violence and economic growth. But for the 
foreseeable future, Iraq will require continued support. And 
because we overthrew the former Iraqi regime, the majority of 
that support must come from the American people.
    As we look to the future, it is essential we ask ourselves 
the right questions. We have been asking, when do we pull our 
troops out of Iraq? This is the wrong question. We should be 
asking, what can we do to help the Iraqis succeed? And we 
should be clear what we mean by success.
    To help answer the question of how to succeed, we require 
objective on-the-ground assessments. We cannot afford to be 
mislead by rosy assessments painted by some, nor apocalyptic 
assessments by others.
    In this regard, I call attention to a bipartisan group 
formed at the urging of Congressman Frank Wolf of Virginia, 
myself and others, the Iraqi Study Group. This group is charged 
with conducting a fresh-eyes assessment of the current and 
prospective situation in Iraq, and is cochaired by former 
Secretary of State James Baker and former Congressman Lee 
Hamilton. We look forward to this bipartisan group's findings 
and recommendations.
    Today we are here to receive testimony from David Walker, 
Comptroller General of the Government Accountability Office. 
Mr. Walker and his audit teams have recently returned from 
Iraq. The GAO's examination identifies mistakes, progress and, 
most importantly, future challenges we face. His testimony can 
help us better understand how to empower Iraqis so they may 
have security, representative government and economic 
prosperity.
    I recently returned from my twelfth trip to Iraq. While 
there, we also visited three countries in the region, the 
United Arab Emirates, Jordan, and Israel. Their leaders 
provided us with one overriding message: We must not fail in 
Iraq, and the United States should not withdraw from Iraq 
prematurely.
    I am convinced premature withdrawal of our military will 
guarantee failure. I believe we must replace our withdrawal 
mindset with a mindset that appreciates what our military, 
State Department and others have accomplished in Iraq and the 
sacrifices made by the people of Iraq to grasp hold of 
democracy and live a better life.
    I agree with Comptroller David Walker and his team when 
they say, ``the war in Iraq will not be won by the military 
alone, that Iraq's future requires strong Iraqi leadership, 
sustained U.S. commitment and a reenergized international 
community.''
    I think we get the first point; are wrestling with the 
second, sustained U.S. commitment; and are not doing enough on 
the third, to reengage the international community.
    As always, we thank the GAO for its absolutely invaluable 
oversight and look forward to the Comptroller General's 
testimony this morning.
    At this time, the Chair would recognize Mr. Waxman.
    [The prepared statement of Hon. Christopher Shays follows:]

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    Mr. Waxman. Thank you very much, Mr. Chairman, for calling 
this important hearing.
    In March 2005, the Bush administration took the United 
States to war against Iraq. Today, more than 3 years later, 
Iraq is actually worse off in key reconstruction sectors than 
before we arrived, and the Bush administration is nowhere near 
feeling the rosy promises it made before the war.
    In October, I released a report, the Bush Administration 
Record, The Reconstruction of Iraq. This report compared the 
administration's rhetoric with the reality on the ground, and 
it found that the administration had failed to deliver on its 
promises in three of the most important reconstruction efforts: 
oil, electricity and water.
    I would like to make this report part of the record for 
today's hearings, Mr. Chairman.
    [The information referred to follows:]

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    Mr. Shays. Without objection, so ordered.
    Mr. Waxman. The report found that, in the oil sector, the 
administration promised to restore Iraq to pre-war oil 
production levels. This was important so Iraq could ``finance 
its own reconstruction,'' but today, Iraq's oil production and 
export levels are still well below the pre-war levels. We spent 
over $2 billion, and the situation is worse than before we 
started.
    In the electricity sector, the administration promised to 
increase Iraq's peak electricity output to 6,000 megawatts. 
After spending more than $4 billion, peak output in October was 
4,600 megawatts. Today, it has dropped to 4,100 megawatts, 
which is below pre-war levels. In fact, embassy officials in 
Baghdad told our staffs we'll never meet demand.
    In the water sector, the administration promised that 90 
percent of Iraqis would have access to clean, drinkable water, 
but despite spending over $1 billion, we're nowhere near this 
goal. Before the war, 50 percent of Iraqis had access to 
drinkable water. By late 2005, only 32 percent did.
    The special inspector general for Iraq reconstruction, 
Stuart Bowen, confirmed these findings. In testimony before 
this subcommittee, he concluded that there is a great chasm 
between what the administration has promised and what it has 
delivered. Mr. Bowen called this the reconstruction gap. In 
January, Mr. Bowen's office issued its own report concluding 
that reconstruction efforts in these three key sectors of the 
Iraqi economy are failing.
    And these aren't the only areas in which progress has been 
poor. A Washington Post article just this month described how 
the Parsons Company will complete only 20 health centers out of 
a planned 142. Despite spending $200 million over 2 years, this 
reconstruction project will suffer an 86 percent shortfall, 
which is really just shocking.
    This morning, in the New York Times, in their lead story on 
the left-hand side, Rebuilding of Iraq Oil Pipeline As Disaster 
Waiting to Happen, this front-page article described 
Halliburton's atrocious work and the Bush administration's 
atrocious oversight on a key project to build oil pipelines 
under the Tigris River at a crossing called Al Fatah. The 
article describes how Halliburton was specifically and 
repeatedly warned by geologists and other experts that its 
approach was flawed and wouldn't work, but the company ignored 
these warnings, pushing forward with the project and wasting 
over $75 million.
    The article, which I would also like to have included in 
the record, is astounding. Halliburton received a $100,000 a 
day just for waiting around and doing nothing. Halliburton cut 
a deal with a subcontractor that required them to drill holes, 
not to actually succeed, but to drill holes. In essence, the 
taxpayer was paying Halliburton to drill holes to nowhere, but 
Halliburton still received its percentage of profits on the 
deal.
    We know that large government contractors like Halliburton 
have repeatedly overcharged the taxpayers. Auditors and the 
Defense Contract Audit Agency have identified over $1.4 billion 
in unreasonable and unsupported charges by Halliburton in Iraq. 
$1.4 billion. Yet, the Defense Department keeps awarding 
Halliburton millions in reimbursements, profits and bonuses 
that the auditors recommended against paying.
    The problem is that the administration's management of the 
reconstruction has been fundamentally incompetent. Billion 
dollar contracts were awarded with little or no competition to 
favored contractors. Competition for discrete projects was 
suppressed by dividing the country into a handful of thiefdoms.
    The administration shipped nearly $12 billion in cash to 
Iraq but disbursed it with virtually no financial controls. 
U.S. Government officials, contractors and subcontractors have 
been charged with kickback and bribery schemes, and dozens of 
additional criminal corruption cases are now being processed. 
Against this backdrop, the Bush administration continues to 
ignore reality.
    Vice President Cheney says that the insurgency is in its 
last throes and that progress on Iraq reconstruction has been 
superb. And in a major speech in December, President Bush 
claimed there had been quiet, steady progress in Iraq. Either 
the President and the Vice President are remarkably out of 
touch, or they are not leveling with the American people.
    Today, as we mark more than 3 years since the invasion, GAO 
will update the subcommittee on the status of these key areas, 
and I look forward to the Comptroller General's testimony.
    Thank you very much, Mr. Chairman.
    Mr. Shays. Thank you, Mr. Waxman.
    Thank you, Mr. Van Hollen, for being here, and you have the 
floor.
    Mr. Van Hollen. Thank you, Mr. Shays, for holding this 
hearing. I also want to thank Mr. Waxman for his leadership on 
a whole series of these issues, including his unveiling of the 
misexpenditures of funds of Halliburton and the other problems 
in the reconstruction effort.
    Mr. Walker, welcome to you. I'm looking forward to your 
testimony.
    Let me just say, we know from the record that the Bush 
administration has bungled the operations in Iraq in many 
different ways. They planned for the immediate invasion and 
toppling of Saddam Hussein, but they did not plan for winning 
the piece. In fact, we know now that, with respect to the 
warfighting effort, they ignored the advice of many of the 
generals at the Pentagon with respect to the number of troops. 
General Shinseki's prediction was famously, of course, proved 
right despite the fact that he was ignored, and worse than 
that, sort of panned at the time by senior leaders at the 
Pentagon with respect to what he said would be needed for boots 
on the ground in order to make the reconstruction of Iraq 
successful.
    Because of many failures, the fact of the matter is, a lot 
of the funds that we had hoped to spend on reconstruction had 
to be diverted simply to provide security for those people who 
have been involved in the reconstruction effort.
    We also know that while there were plans in place at the 
State Department and elsewhere for the reconstruction effort, 
the fact of the matter is those plans were essentially junked 
and ignored. The whole reconstruction effort was turned over to 
the folks, Secretary Rumsfeld and others at the Pentagon, who 
were totally unprepared for the reconstruction effort and for 
rebuilding in Iraq.
    We famously heard before the war from Under Secretary 
Wolfowitz at the time that the Iraqi oil production would 
quickly be able to pay for the costs in Iraq. We know now that 
we have not even come up yet to pre-war production levels, and 
that is not beginning to cover the costs that we are incurring 
in Iraq and, of course, doesn't begin of course to pay for the 
lives lost.
    So I think there are many, many serious questions that we 
are facing in Iraq. We have heard rosy predictions continuously 
from the administration with respect to Iraq, and sometimes you 
just have to think that it's Alice in Wonderland over there.
    So I'm looking forward to your assessment, a hardnosed 
assessment; I hope a realistic assessment of what's going on in 
Iraq.
    And, Mr. Chairman, again, thank you for holding the 
hearing.
    Mr. Shays. Thank the gentleman.
    Before swearing you in, Mr. Walker, and receiving your 
testimony, I would like to ask unanimous consent that all 
members of the subcommittee be permitted to place an opening 
statement in the record and the record remain open for 3 days 
for that purpose, and without objection, so ordered.
    Ask further unanimous consent all witnesses be permitted to 
include their written statement in the record. Without 
objection, so ordered.
    Mr. Waxman, I know you wanted two requests. We put the 
first in; what was the second?
    Mr. Waxman. The second was today's New York Times article 
about Halliburton drilling holes.
    Mr. Shays. We'll put the New York Times in without 
objection, so ordered. The other one was?
    [The information referred to follows:]

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    Mr. Waxman. The first one was our report on last October.
    Mr. Shays. OK. This is the report of the minority staff of 
the full committee.
    Mr. Waxman. Correct.
    Mr. Shays. Mr. Walker, it's a pleasure to have you here. I 
would like to swear you in, but I think, as I mentioned to you, 
anyone else who may be asked to give some comment, I would like 
you to stand up, not sit at the desk, but at least stand up and 
be sworn in. Only two.
    [Witnesses sworn.]
    Mr. Shays. I'd note for the record the witnesses responded 
in the affirmative.
    I think it's fairly clear you're the only witness, the only 
panel. I have no interest in you trying to finish in 5 minutes. 
I want you to say whatever you need to say and then what we're 
going to do is we're going to have the Members have 10 minutes. 
We'll keep time but keep coming back so we may have one, two, 
three, four, whatever rounds, and maybe there will be some 
other Members that will join us.
    At this time, Mr. Walker, we're going to keep the clock on 
and keep turning it over every 5 minutes so you get a sense of 
how long, but speak as long as you need to.

    STATEMENT OF DAVID M. WALKER, COMPTROLLER GENERAL, U.S. 
    GOVERNMENT ACCOUNTABILITY OFFICE, ACCOMPANIED BY JOSEPH 
                           CHRISTOFF

    Mr. Walker. Thank you, Mr. Chairman, Mr. Waxman, Mr. Van 
Hollen. I appreciate all of you being here today, and I also 
appreciate the opportunity to testify before this subcommittee 
on the U.S. efforts to stabilize and rebuild Iraq. Since you 
have entered my entire statement in the record, Mr. Chairman, I 
will summarize so we have more time for questions and answers.
    Between fiscal years 2001 and 2005 the U.S. direct 
financial commitment to securing and establishing Iraq grew to 
$278 billion. In February 2006, the administration requested an 
additional $123 billion to support U.S. stabilization and 
reconstruction operations in Iraq and Afghanistan in fiscal 
years 2006 and 2007. These amounts do not include future direct 
costs nor do they include the significant additional 
recapitalization and other longer-term costs that will be 
incurred due to the conflict in Iraq.
    In November 2005, the President issued the National 
Strategy for Victory in Iraq. That strategy states that 
progress along the political, security or economic track serves 
to reinforce the other tracks. My testimony today is based on 
the four reports that we've issued to the Congress since July 
2005 and on our team's recent trips to Iraq, including my own 
most recent visit to Iraq earlier this year.
    In summary, the war in Iraq will not be won by the military 
alone. Real success requires an integrated Iraqi, United States 
and international effort to meet the political, security, 
economic and other needs of the Iraqi people. In this regard, 
calendar 2006 will be a critically important year, and more 
needs to be done by both the United States and the 
international community to help ensure that it results in real 
and sustainable progress within Iraq.
    The United States, our partners in Iraq have made some 
progress in stabilizing and rebuilding Iraq. Iraqis have voted 
in increasing numbers, with over 12 million casting votes in 
the December 2005 election.
    The number of security forces that the Coalition has 
trained and equipped has increased from about 142,000 in March 
2005 to about 242,000 in March 2006. In addition, the Iraqi 
forces are increasingly assuming greater responsibility for 
their Nation's security.
    Finally, the United States has completed or has underway 
about 500 water, oil and electricity reconstruction projects. 
However, this progress is tempered by the overwhelming 
challenges faced in forming a permanent government, quelling 
the insurgency and sectarian violence, providing basic 
services, and financing future reconstruction efforts.
    As previously noted, the Iraqis have held three national 
elections, each with higher voter turnout percentages than the 
previous election. This is a real accomplishment. However, 4 
months after the December 2005 election, Iraq is still forming 
a permanent government. Recent events provide some hope that 
the new government will be formed in the near future.
    Once formed, the new government will confront the enormous 
task of strengthening a range of government institutions, 
disbanding the militias, resolving disputes over national 
borders and oil revenues, and addressing significant 
corruption. Appointments to the key ministries of interior, 
defense and oil in particular will be critical to unifying Iraq 
and minimizing sectarian violence.
    As the new government develops, the Iraqis will need 
assistance in training to help strengthen their national and 
provincial governments. They need more capacity-building 
assistance of a civilian nature, and it needs to come not just 
from the United States but also from others in the 
international community.
    From 2004 to 2005, attacks against the Coalition, Iraqis 
and infrastructure increased 23 percent. Despite Coalition 
efforts, the insurgents continue to demonstrate to recruit, 
supply and attack Coalition and Iraqi security forces.
    In addition, the sectarian tensions and violence increased 
following the February 2006 bombing of the Shi'a shrine in 
Samarra. Since then, Iraqis have become increasingly concerned 
that civil war could break out.
    U.S. reconstruction efforts have focused on restoring 
Iraq's basic services, including refurbishing oil facilities, 
increasing electrical generating capacity and rebuilding water 
treatment plants. As of March 2006, oil and electricity 
production were below pre-war levels, and reconstruction goals 
for oil, electricity and water had not been met.
    Higher than expected security costs, funding reallocations, 
inadequate maintenance and other challenges have slowed the 
pace of reconstruction efforts and limited the impact of the 
services provided.
    Iraq will likely need more than $56 billion, more than the 
additional $56 billion estimated, for reconstruction and 
stabilization efforts. Let me restate that. They will likely 
need more than the originally estimated $56 billion in order to 
achieve the reconstruction and stabilization objectives, but it 
is unclear how Iraq will finance its reconstruction needs.
    U.S. commitments are largely obligated, and future 
commitments focus on sustaining existing infrastructure, 
strengthening ministerial capacity, and training and equipping 
Iraqi security forces. International donors have been reluctant 
to commit additional funds until security improves and Iraq 
accounts for the donors' previous contributions.
    Iraq can only contribute to its future reconstruction needs 
if it increases its oil revenues, reduces energy and food 
subsidies, controls government operating expenses and takes 
steps to effectively combat corruption.
    Iraq is at a precarious stage in its emerging democracy. 
2006 will be a critically important year in its development. In 
moving forward to achieve U.S. goals, it is important that the 
United States continue training and equipping Iraqi security 
forces and, more importantly, ensuring that these forces have 
the logistical capabilities to support and sustain themselves. 
This is a key gap and a critical need.
    The United States, along with the international community, 
should also help Iraqis develop the budgeting and 
administrative tools they need to run their national and 
provincial governments. Additionally, transparency and 
accountability mechanisms are essential, given the legacy of 
corruption inherited from the previous regime.
    Efforts should also be taken to assure the Iraqis are 
capable of maintaining power plants, water treatment facilities 
and other U.S.-funded infrastructure improvements. Although the 
United States has played a key role in addressing these 
challenges, it is important for the Iraqis to assume greater 
leadership and for the international community to increase its 
efforts.
    Collectively, Iraq's future requires strong Iraqi 
leadership, sustained U.S. commitment, and a reengaged 
international community that can provide support for a range of 
civilian needs for a significant period of time. More needs to 
be done to help the Iraqis help themselves build capable 
government institutions that can deliver real results that 
benefit all the Iraqi people. All of these steps will be 
essential in order for real success to be achieved in a 
reasonably timely and sustainable manner.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Walker follows:]

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    Mr. Shays. Thank you, Mr. Walker. We appreciate your 
testimony.
    There are three Members here. I think I'll start with Mr. 
Waxman then I'll jump in, and then we'll go to Mr. Van Hollen, 
and then we'll just come back.
    Mr. Waxman, you have 10 minutes.
    Mr. Waxman. Thank you, Mr. Chairman.
    Mr. Walker, I'm pleased that you're here. Six months ago, 
we had a hearing in this subcommittee where we heard from a 
panel of inspectors generals and auditors and their unanimous 
opinion was that the Bush administration had not fulfilled its 
reconstruction promises in three critical areas; in the oil, 
electricity and water areas. Some sectors were actually in 
worse shape than before the war. So I appreciate your testimony 
because it gives us an opportunity to assess the current status 
of these key sectors.
    Based on your testimony, it seems clear that the 
reconstruction efforts are continuing to fail. In the oil 
sector, the administration committed to restoring Iraq's oil 
production and exports to pre-war levels, and to do that, it 
has already spent over $2 billion to meet the objective.
    Mr. Walker, has the administration met this objective?
    Mr. Walker. No. The objectives have not been met with 
regard to the oil, electricity and water sectors.
    Mr. Waxman. Are we still below pre-war levels?
    Mr. Walker. We're still below pre-war levels with regard to 
oil and electricity. It's unclear what the water level was pre-
war. That's information we don't have.
    Mr. Waxman. Well, is the oil part higher or lower than 
before we arrived?
    Mr. Walker. It's lower.
    Mr. Waxman. In the electricity sector, the administration 
said it would increase peak electricity output to at least 
6,000 megawatts, and it spent $4 billion in an attempt to meet 
this objective. Has the administration reached this objective?
    Mr. Walker. No, it has yet to reach that objective.
    Mr. Waxman. Are we close?
    Mr. Walker. We've got a ways to go. We are slightly below 
pre-war levels but quite a bit below what the goal is.
    Mr. Waxman. My understanding is that the peak electricity 
output of 4,100 megawatts is lower than the pre-war levels of 
4,400 megawatts, and of course, that's far short of the 6,000 
megawatts promised.
    Mr. Walker. My data, Mr. Waxman, says peak level post-war 
was about 5,400 megawatts, which was achieved in July 2005, but 
now we're down to about 4,100 megawatts. The pre-war was 4,300 
megawatts, and the goal is 6,000 megawatts.
    Mr. Waxman. Why is that? We evidently went up, but down 
again.
    Mr. Walker. There continues to be a significant amount of 
instability in much of Iraq. There continues to be a problem 
with regard to the effects of the insurgency, continues to be a 
problem with regard to the ability of the Iraqis to be able to 
maintain facilities that we rebuild. So it's a combination of a 
number of factors that have caused us to be where we are.
    Mr. Waxman. What impact is this having on the Iraqi people?
    Mr. Walker. Obviously, the Iraqi people are like people 
anywhere in the world, they care about safe streets, having 
electricity, clean water, having the trash picked up. And 
obviously, to the extent those areas are not at the levels that 
they need to be, it has an adverse effect on their daily 
quality of life.
    Mr. Waxman. How many hours a day do the average Iraqis have 
electricity?
    Mr. Walker. It depends on the area. It varies. As you know, 
Mr. Waxman, before the war, we had a situation where the regime 
was trying to focus its efforts on providing essential 
services, including electricity, to primarily the Sunni areas, 
and other areas were not provided as much capability. I would 
ask Mr. Christoff to provide some more details.
    Mr. Christoff. The national average as of last week was 
12.3 hours, but that varies. The Kurds have about 16 to 18 
hours a day. The Shi'as in the south are averaging around 10. 
Baghdad is at about 5 to 8.
    Mr. Waxman. It's reverse rather. The Shi'a areas are 
getting more electricity.
    Mr. Christoff. And the Kurds.
    Mr. Walker. The stability, obviously, as you know, Mr. 
Waxman, and we've got it in our testimony, varies by region of 
the country. Some of the most challenging areas of the country 
are in the Sunni-dominated areas.
    Mr. Waxman. Are these temporary problems, or are production 
levels consistently below pre-war levels?
    Mr. Walker. They have gone up and down. They have not 
consistently been below pre-war levels because pre-war levels 
were 4,300 megawatts. As I mentioned to you, in July 2005, we'd 
gotten up almost to 5,400 megawatts at one time, but we've 
never reached our goal. But keep in mind, our goal is 
significantly higher than the pre-war level. The pre-war level 
was 4,300; our goal was 6,000.
    Mr. Waxman. In the water sector, the administration said it 
would make sure that 90 percent of Iraqis had access to 
drinkable water, and to meet this objective, we spent over $1 
billion. Have we achieved this objective?
    Mr. Walker. We have not with regard to potable water. Even 
though production has increased of late, we still have a 
problem because there are problems in transmission; there's a 
significant amount of loss of water between the water treatment 
facilities and Iraqi homes.
    Mr. Waxman. The administration officials keep telling us 
we're not hearing the good news stories from Iraq and that 
substantial progress has been made in rebuilding the country. 
Six months ago, the inspectors general and auditors told us 
there was a huge gap between the administration's rhetoric and 
reality. In fact, Stuart Bowen, the special inspector general 
for Iraq reconstruction, called this a reconstruction gap. 
Seems to me your testimony confirms that the reconstruction is 
still failing in key sectors.
    Mr. Walker, I'd like to take a closer look at the oil 
sector. I recently released a report that examined 
Halliburton's second oil contract, called RIO 2, which was a 
followup to Halliburton's original no-bid oil contract. The 
report analyzed hundreds of pages of previously undisclosed 
correspondence, evaluations and audits. It revealed that 
government officials and investigators have harshly criticized 
Halliburton's performance under RIO 2.
    Here are the exact words that the government officials and 
investigators used to describe Halliburton's performance, 
``Profound systematic problems, exorbitant indirect costs, 
misleading, distorted cost reports, a lack of cost control, an 
overwhelming negative evaluation and an obstructive corporate 
attitude toward oversight.''
    Halliburton's cost reports were so bad that the Army took 
the extreme step of issuing a cure notice in January 2005. They 
notified Halliburton that its RIO 2 contract could be 
terminated if the problems were not fixed.
    Are you, Mr. Walker, aware of any other cure notices issued 
under major Iraq contracts?
    Mr. Walker. I'm not. That was not our work, Mr. Waxman, but 
I will check with my staff. And if we're aware of anything 
else, I'll be happy to provide it for the record. As you know, 
there's a special inspector general that has been created for 
Iraq which has primary responsibility for doing audit, 
investigation and evaluation work for contracting activities in 
Iraq.
    I hate to say it, but the simple fact is that the 
contracting area has been on GAO's high-risk list for the 
Defense Department for many years, and Iraq is no exception. I 
wish our problems were frankly confined just to Iraq, but we 
have serious contracting problems all throughout the Defense 
establishment.
    Mr. Waxman. Let me ask you this, in conclusion. 
Halliburton's overall performance was so poor that it received 
no award fees for first year of work. Are you aware of any 
other major contractor in Iraq that received no award fee 
over--on over a quarter of a billion dollars of work?
    Mr. Walker. I'm not, but I'll check and provide it for the 
record. I would note with regard to the article that you 
referred to at the outset of the hearing that I had an 
opportunity to review, that they did receive a 4 percent award 
fee, it's my understanding, at least that's what was reported.
    I think one of the problems we have in government, Mr. 
Waxman, is that if we're paying incentive and award fees, we 
need to pay for positive results achieved. The people do what 
they promise or what we need and what they promise when they 
promised it and at the cost that was agreed to. Unfortunately, 
that's not the case for all too many contracting arrangements 
in government. They pay for effort, and that's it, not results.
    Mr. Waxman. On the House floor when we considered the 
supplemental appropriations bill for the future work in Iraq, 
Afghanistan and other areas, I offered an amendment that said 
if the government has been overcharged by any contractor by a 
sum of at least a hundred million dollars, the government 
shouldn't be giving any other contracts to that contractor.
    The argument that was advanced on the House floor was, 
well, what if you still need the contractor, what if you still 
need that contractor even though the contractor has taken 
advantage and overcharged us as its client?
    Are we so dependent on Halliburton or any private 
contractor that we couldn't find anybody else to do work if 
they turn out to be doing poor work and overcharging for that 
work?
    Mr. Walker. Several things. First, the practical problem 
is, how do you define overcharged? That would be the practical 
problem. Second, the Defense Department has relied upon KBR, 
which is a subsidiary of Halliburton, to provide logistical 
support and a range of other services for many years.
    There are other options, but there aren't many options, and 
that's one of the things we need to be looking at, is we need 
to be making sure that we have viable options with regard to 
known and recurring type needs such that if people aren't 
delivering what they promise or if the taxpayers aren't getting 
the type of deal that they deserve, that we have viable options 
that we can pursue.
    So the need may still be there, the question is, how many 
people can meet the need?
    Mr. Waxman. I appreciate that answer. That's really 
somewhat distressing because, one, we ought to insist if we're 
paying the money, they do what they're required to do. And if 
they're not going to do what they're required to do, they 
should be sanctioned and forced to give back the money, and 
then we ought to be seeking out others who can do specific 
tasks instead.
    Mr. Walker. Mr. Waxman, if I might add, one of the 
challenges that exists within the Defense Department is we need 
to improve our contracting arrangements so we are very clear as 
to what we are asking the contractor to do: We expect X result 
by Y time for Z cost.
    Now it's not always possible to do that, but many times it 
is, and we haven't done that. All too frequently we're paying 
for efforts rather than results. That's got to change.
    Mr. Waxman. The Bush administration and others have argued 
that security has been the big problem; that these contractors 
can't perform because we haven't been able to get a secure 
environment for reconstruction.
    I would submit, and be interested in your comment, that 
we've had some devastatingly poor choices made with respect to 
disbanding the Iraqi army. This RIO 2 contract shows that poor 
contractor performance, aside from security, poor contractor 
performance is a major factor, not an incidental one. Do you 
agree?
    Mr. Walker. It is a problem. With regard to security, I 
think it's important to keep two things in mind: As our 
statement notes, estimates of the direct cost associated with 
providing security associated with reconstruction efforts range 
from 16 percent to around 25 percent or so. But what that does 
not capture, which is very, very important, that's the direct 
cost of providing security.
    You also have productivity losses. When you have an 
unstable security environment, then you can end up having a 
significant amount of reduction in productivity and lost work 
effort because of that. That number is not captured in there. 
So if you wanted to totally absorb the cost, I would argue, on 
a full absorption basis, it would be much higher.
    Mr. Waxman. Just looking at today's New York Times article 
where Halliburton had a project to build oil pipelines under 
the Tigris River, and then Halliburton was, even after they 
specifically and repeatedly have been warned by geologists and 
other experts that their whole approach to this work was flawed 
and it wouldn't work, they went ahead anyway. And they spent 
over $75 million before they finally had to admit I guess it 
wasn't such a good idea to ignore all the geological experts.
    That had nothing to do with security; that was plain 
incompetence, and it didn't hurt them at all because they still 
got paid.
    Mr. Walker. That's an example, Mr. Waxman, of wholly 
inadequate transparency among other things with regard to what 
the situation was. That was an instable area, there's no 
question about that. There were security challenges. But there 
were other problems that occurred that led to that. One of the 
problems was there was not enough transparency over exactly 
where do they stand and what progress was being made and what 
results were we getting for the costs that was being incurred, 
and not only how much direct security costs being incurred, but 
how much time was being lost in other efforts associated with 
that.
    Mr. Waxman. Well, the transparency, we should have been 
able to see their terrible judgment, which ended up costing us 
at least $75 million.
    Thank you, Mr. Chairman.
    Mr. Shays. You're welcome.
    Mr. Walker, thank you for being here. I want you to first 
tell me how you've allocated your folks. You basically have 
done four studies to this subcommittee, but tell us about your 
four studies that you have done, not in any great depth but 
basically what you have done.
    Mr. Walker. We did work, Mr. Chairman, spanning all three 
major dimensions. As you know, these are just four that we've 
issued within the last several months. We have many other 
engagements ongoing.
    Basically, we've tried to do work dealing with the security 
environment, the governance situation, also with regard to 
reconstruction efforts. The specific reports that are referred 
to I think are outlined in my testimony. But we're trying to 
follow those three major dimensions because they are consistent 
with the plan that the executive branch has developed for Iraq, 
and we think it makes sense for us to try to follow that 
framework to the extent possible.
    As you know, we do all this work under the Comptroller 
General's authority but with your support and the support of 
other Members and I want to compliment you again for the number 
of hearings, oversight hearings you have had. There's not 
enough oversight going on in Congress, but this subcommittee is 
clearly an exception to that general rule.
    Mr. Shays. Thank you.
    What I'd like to do is I'd like to isolate each part, the 
security, the governance and the reconstruction. I'm going to 
say one of my concerns is, when I hear your recommendations, 
which I agree with, I want to be clear whether you think we 
fail if we don't--for instance, your primary point is we need 
to involve the international community. And this is clearly a 
crucial year. If the international community basically sticks 
their nose up at us and says, forget it, are you saying we're 
going to fail? Or are you saying it's going to be a lot more 
difficult and take a lot more time?
    Otherwise, if you are saying that if we don't get 
international help, we fail, you are basically putting it right 
in the hands of the international community. I would like to 
think that's not true. If it is true, I need you to tell me.
    Mr. Walker. I believe it is critically important that the 
international community be much more engaged with regard to 
capacity building for the new Iraqi government than it has 
been. As you know, there were strong differences of opinion 
within the international community about whether and to what 
extent we and others should have gone into Iraq, but it is in 
our combined interest for the entire international community 
for Iraq to succeed.
    Can we be successful if the Iraqi community--pardon me, if 
the international community does not engage? Yes, it's not 
impossible to be successful, but a lot more difficult, take a 
lot more time, a lot more money.
    We also have to keep in mind that the international 
community, the U.N. as an institution, as well as other 
countries have significant expertise in trying to help other 
countries help themselves be successful. It's important that 
come forth at this point in time because, in some cases, they 
may be able to do things that we won't be able to do. We have 
limited resources; we have limited capacity. And, candidly, one 
of the big concerns, Mr. Chairman, is, at certain levels, we 
may have 15 to 20 more times people in uniform than we have 
civilian players.
    Mr. Shays. Let me kind of dissect part of this. This 
subcommittee has done a lot of investigations. One was, we 
initiated the Oil-for-Food program. When we began the Oil-for-
Food program, we learned that Saddam Hussein undersold the oil 
and got kickbacks and directed it where he chose and overpaid 
for commodities and got kickbacks and directed it for where he 
wanted.
    The Dulfer report said two things: No weapons of mass 
destruction; the other thing the report said is, Saddam Hussein 
had bought off the French and the Russians and was convinced 
they would not support us in the Security Council and therefore 
did not believe we would come. He didn't believe we would 
attack him because he was convinced that his Oil-for-Food 
program had bought off the French and the Russians.
    So I'm wrestling with, if they were basically bought off, 
what unbuys them?
    Mr. Walker. First, as you know, he is gone. We're dealing 
with a new situation. The one area where you can clearly say 
that tremendous progress has been made is politically. 
Tremendous progress.
    I'm testifying on Thursday before the Congress on the issue 
of the U.N. and what the U.N. needs to do in order to be able 
to strengthen its controls and also what the U.N. needs to do 
in order to improve its oversight practices.
    I believe, Mr. Chairman, that it is possible to be able to 
provide additional transparency and accountability and to get 
better results. We need to learn from Oil-for-Food. We need to 
try to make sure that appropriate steps are taken to minimize 
that happening again.
    Mr. Shays. I'm not sure you're really responding to my 
question. If you don't have an answer, that's OK, but it's not 
debatable. Saddam bought off the French and the Russians. They 
did not support going in. It's not debatable, at least in terms 
of his own people who said Saddam did not believe we would 
come. He was like Stalin after we attacked; just as the Germans 
attacked, he didn't believe it and had to have it reconfirmed.
    That's one of the things I'm absolutely convinced about 
from my hearings, is Saddam had bought off the French and 
Russians; the U.N. would not support us. So what makes them 
support us now? What information do you have that could make me 
feel that they are going to support? That's what I'd like to 
know.
    Mr. Walker. There are two aspects, Mr. Chairman. I 
understand what you're saying. First, whether or not the U.N. 
as an institution and how it does business and what it takes 
for it as an institution to provide broadbased support, whether 
it can and will step forward. It is providing some support.
    Mr. Shays. They have stepped forward politically. I want to 
make sure it's part of the record. They have helped the 
election process. And when I was there for their second 
election a week before, and I met with the U.N. Commission, 
they had helped organize the first vote, the second and third. 
Hugely successful.
    I'm not right now talking about the U.N. structure, the 
commission. They said to me that the elections in October would 
be the fairest anywhere in the world, that there would be 
greater support of voters than we have in the United States. 
And we learned that they voted, 63 percent of all adults, not 
registered voters; we learned that when they voted, 79 percent 
supported the constitution, contrary to what people thought. 
And then in December, 76 percent of all adults. In the United 
States, if we get 65 percent of the two-thirds who bother to 
register, we think that's huge.
    So you and I can probably agree that their election 
process--in just 1 year establishing a government, created a 
constitution, ratified a constitution, elected a government--is 
unbelievably successful. Would you agree?
    Mr. Walker. It has been successful on the political front, 
yes.
    Mr. Shays. So the issue now, at least in terms of the 
general populace, so we can kind of put that aside and we can 
kind of say that the U.N. was very helpful in that process. 
That's an argument I think that says the value of having the 
international communities. I'm not arguing with your point that 
if we can get the international community engaged so the 
political process was successful, the U.N. was helpful, other 
countries helped in that process of the election. It leaves the 
security and the reconstruction. Obviously, the political 
process, as you point out, of 4-month delay is a big issue. So 
they are learning.
    Would you agree that the Sunnis and Kurds--let me ask it 
this way and then I'll tell you what I think. What did you 
learn from the Sunnis and Kurds saying no to Jafri and 
ultimately the Shi'as agreeing to select someone else? What did 
that tell you about the political process?
    Mr. Walker. That's a recent event and a subsequent event to 
the work that we did and so we haven't done work directly on 
that.
    If I can, Mr. Chairman, if you'll indulge me for a second, 
let me be clear as to where I think we need additional help 
from the United States and from the international community, 
now that it looks----
    Mr. Shays. I'm going to give you that chance because we're 
going to be here all day. What I'm trying to do is isolate 
where the issue is, and you want to jump right there, but I 
want to make sure that we have some understanding or 
disagreement, but some understanding of our disagreement on the 
three fronts, the economic, the security, the political and the 
economic.
    What can we learn--if you want me to answer the question, I 
will, if you're not inclined to, but what do you think--what 
was the significance of ultimately, in your judgment, the 
minority holding fast and forcing the majority to select 
someone else?
    Mr. Walker. It shows that one has to compromise in order to 
achieve progress. It does show a willingness in the end, in my 
view, for a desire to try to form a government of national 
unity that can be acceptable broadly within Iraq. I think that 
is a plus. The real key, Mr. Chairman----
    Mr. Shays. Unless you want to still talk about the 
political. Don't leave the political yet.
    Mr. Walker. I will talk only about the political. The real 
key is substantive success. As we know, we have a prime 
minister designate that was the result of the process that you 
just mentioned. Now that has to be finalized and the government 
needs to be stood up beyond the prime minister, including 
naming ministers to head all the different government agencies, 
with particular importance to defense----
    Mr. Shays. Let me get to that because you're talking about 
what I think is a level underneath the democratic process of 
governance, which I think is a key point.
    What I learned from this was when I go to Iraq, I meet with 
Iraqis, the Sunnis, Shia's and Kurds. They lecture me. They 
say, I'm an Iraqi. They say, I'm a Sunni, but I'm married to a 
Shi'a, or the Kurds will say, I am a Kurd, but I'm a Sunni. I 
am an Iraqi.
    From the press, I learned Sunnis, Shi'as and Kurds, but 
from the Iraqis, I learned Iraqis. But those who never 
experienced democracy, they said majority rule, we get to run 
the place. And what we learned when we became a country is 
majority rule, minority rights.
    For me, what is thrilling about what took place was that 
the minority, the Kurds and the Sunnis, both 20 percent, give 
or take, link up, were able to veto the choice of the Shi'as. 
The Shi'as resisted for month after month, finally said, you 
know what, we accept minority right. You don't get to choose 
who we choose, but you get to veto.
    To me, that's just one more progress that's noticeable and 
real. Now you want to uncover the top part, which is the 
democracy, and get into the governance. I think there are some 
huge points here, and I think the point you're telling me is to 
succeed with the governance, because I'm going to tell you what 
I think and you tell me if I'm wrong, you have defense, 
interior, you have oil, go down the line, agriculture and so 
on. We don't have the capability to be with every department, 
nor do we have frankly the respect of the Iraqis to be the only 
ones.
    So what I'm hearing you say is if you want that level to 
work, the governance, we have to bring in folks who have had 
this experience in other parts of the world.
    Mr. Walker. Correct. We and the international community 
have to do more to help the Iraqis help themselves build these 
institutions that can deliver results that all Iraqis care 
about. We talked earlier in this hearing about what's the 
status of the electricity, what's the status of the oil, what's 
the status of the water. Ultimately Iraqis are like people 
anywhere, they care about having safe streets, they want to 
have jobs, they want to have electricity, they want to have 
clean water, they want to have their trashed picked up, and we 
need to make sure that we're helping to deliver on that and 
it's not just us, it's the international community.
    Mr. Shays. I just want to cover this territory. We 
obviously have the concern about their learning about 
democracy, being able to recognize majority rule, minority 
rights. The public has proved to us--they put us to shame. In 
their country, they participate at risk of death. I would also 
say at risk of death. You have Sunnis, Shi'as and Kurds that 
are trying to form a government, and in some areas, they're 
targets. They're not dead men walking, but their lives are at 
risk every day. Very brave people.
    But it gets into this issue of corruption. Obviously, 
knowing how to do things, but corruption. I would like to say 
to you if anything brings down Iraq, my biggest fear is 
corruption. It leads me to make a parenthetical.
    When Duke Cunningham, a Vietnam war hero and I believe a 
very patriotic person slipped in, step by step, into 
corruption, into payoffs, he not only was a corrupt person, he 
was a traitor. Because in the end, that's what brings down a 
democracy.
    How do we deal with the corruption in Iraq? And you put it 
up there at high a level, as I would. Way up there.
    Mr. Walker. It is a very serious problem. When I went to 
Iraq the latest time, the two primary reasons that I went there 
was, No. 1, to participate in a monthly meeting that is held 
between General Casey, our Ambassador, and all the other top 
officials where they're trying to develop metrics and 
milestones to measure progress across all these dimensions 
which we and others have recommended for some time; and, 
second, to meet with my counterpart who's head of the Iraqi 
supreme audit institution.
    I might note that I met his predecessor, who 3 weeks after 
meeting him was killed in a car bomb. When I met with my 
counterpart in Iraq, we actually had to change locations 
because one of our bomb sniffing dogs sniffed an explosive 
device close to where we were supposed to meet. So you're 
right, the people there are risking their lives in many cases 
to do their job.
    We, the GAO, the international organization of supreme 
audit institutions, and others are trying to work to help the 
Iraqi Supreme Audit Board build its capacity to be able to do 
its job. I met last week with the chief justice of the 
Commission on Public Integrity, which as you know is a critical 
part of the Iraqi government to try to be able to combat 
corruption, and we are trying to work with him along with 
helping him network and my counterpart in Iraq to network with 
their Arab counterparts and others in the international 
community to try to deliver results.
    In the final analysis, there are several things that are 
going to have to happen. There are significant revenues being 
lost as a result of corruption and as a result of the resale of 
oil and products--oil products.
    Part of the problem with that is the pricing structure for 
petroleum products in Iraq is much lower than it is in the 
surrounding area, which creates a great incentive to arbitrage, 
to be able to obtain access to this and, you know, just go next 
door, one of several countries next door in order to generate 
the revenues from that. That has to be addressed, but that is 
going to be a difficult political decision because you're going 
to have to raise oil prices and gasoline prices in order to 
undercut that. Now look at how much controversy there is in 
this country right now with the increase in gasoline prices, 
but there you're talking about going from, you know, 25 cents a 
gallon to 85 to $1.25.
    Mr. Shays. Let me just close up with a question so I can 
move to Mr. Van Hollen. Mr. Van Hollen, Mr. Waxman and I both 
ended up with 15 minutes, so you will have that time.
    So the bottom line is corruption is huge. And do you 
believe it's systemic throughout----
    Mr. Walker. It is a pervasive problem. It is particularly 
acute in the oil sector because that's over 90 percent of the 
government's revenues.
    For example, when I was in this meeting, and some of the 
information is classified so I can't get into this information, 
I looked at the data that they put up on the chart, and within 
15 seconds I could tell that there was tremendous corruption 
going on. Because you know what the price of oil is, you know 
what production is, and you can see what's going on with 
revenues, and they don't track. So this is a serious issue that 
has to be addressed, but it's not confined just to that sector 
of the economy.
    Mr. Shays. I'm just going to conclude by telling you what I 
think I'm hearing you say. And what I think I'm hearing you 
saying is that we absolutely need the help of the international 
community if we are going to see real and noticeable progress; 
that, absent that, it is going to stretch out at infinitum--and 
I'm going to put my parenthetical in--and then I question 
whether the American people will have the staying power if they 
don't start to see just continued and real progress. And, 
obviously, if the Iraqis don't see real progress, then I think 
they also look to do things in a different way.
    I'm also going to say what I'm hearing you say--which I 
wasn't thinking about in the way you were, but I'm happy you 
brought it out--is I've been looking at the government sector, 
the democratic--the governance sector more in terms of the 
elected officials, and you're opening my eyes to see, lift that 
cover up and look at individual government agencies and the 
need to have some real oversight there, and obviously our 
foreign friends could be helpful in that.
    Mr. Walker. It's not just oversight. It's capacity building 
to help the people responsible for managing those agencies and 
delivering results to be effective in doing so but then having 
oversight to provide checks and balances to maximize the----
    Mr. Shays. The training and the mentoring.
    Mr. Walker. Right.
    Mr. Shays. Thank you, Mr. Van Hollen, for your patience.
    Mr. Van Hollen. Thank you, Mr. Chairman.
    Mr. Walker, thank you again for your testimony.
    You were very charitable when you said that there hadn't 
been enough oversight in the Congress here. With the exception 
of this subcommittee pursuing some oversight within its limited 
jurisdiction, I think the House of Representatives has been 
totally AWOL when it comes to oversight on this issue and has 
failed to live up to its constitutional responsibilities. And I 
think, frankly--again, with the exception of the subcommittee--
it's embarrassing as an institution, as a separate branch of 
government.
    We all remember back in May 2003, back on the aircraft 
carrier Abraham Lincoln when the President unveiled the big 
placard saying ``Mission Accomplished.'' That was May 2003. I 
think we can understand why the American people now have some 
skepticism when the President talks about his strategy for 
victory and has a big placard there.
    If you go through the measurements that we're talking about 
today and you look at the strategy for victory and their list 
of accomplishments, it is missing progress in the areas we're 
talking about, in the oil sector, in terms of comparison to 
prewar levels, electricity, other major measures of 
infrastructure improvement in the country. As we've said, you 
know, a big part of the problem has been the totally difficult 
security situation on the ground in Iraq.
    In February of this year, when the report was issued, it 
stated that the security situation in Iraq has deteriorated 
since June 2003, with significant increases in attacks against 
Iraqi and coalition forces. Since that report, of course, we 
did have the bombing of the Mosque. Even after the new prime 
minister was named, we had a series of bombings in Baghdad. 
That same day we found a number of people, again, who had been 
shot through the head by militias.
    I take it that between February and today you continue to 
believe that the security--we have not turned the corner on the 
security situation; is that right?
    Mr. Walker. There are still challenges. The data with 
regard to attacks from March is still classified. We were able 
to work with the Defense Department to obtain declassification 
of the January and February data but not March yet. I think if 
you look at page 11 of my testimony, figure two, you'll see a 
summary of the stability status, including security for Iraq. I 
don't think that's changed materially.
    Mr. Van Hollen. Did you have an opportunity to form an 
opinion during your visit there with respect to whether we've 
made any progress in terms of reducing militia activity, 
reducing the infiltration of militias into police forces, and 
the extent to which the armed forces--not the police forces, 
but the national armed forces--are successful in being free of 
sectarian sort of divisions in their ranks?
    Mr. Walker. We are doing additional work in that area.
    I will tell you that, based upon the work that we've done 
so far, much more progress has been made with the military in a 
number of fronts, including that front, than with regard to the 
police forces. The military has come along further, and the 
infiltration is a bigger issue based upon data that we have so 
far with regard to the police forces.
    Mr. Van Hollen. And no signs of improvement, to your 
knowledge, in that area.
    Mr. Walker. I couldn't say there's no signs of improvement. 
It's still a challenge.
    Mr. Van Hollen. All right. Let me ask a little bit about 
the sustainability issue because that's been a continuing 
challenge. Even when we've had some limited success in 
rebuilding infrastructure, the capacity of the Iraqi agencies, 
civilian agencies to maintain those improved infrastructures 
has been a very serious problem. The chairman alluded to it a 
little bit at the end of the questioning, the fact that, in 
addition to the political components, just the experts and 
everyday ability to maintain services is a challenge, to say 
the least.
    Can you give us any kind of confidence that we are 
improving in that area? Because if you look at the measures, it 
doesn't seem to be. It seems, you know, we take one step 
forward in terms of infrastructure, reconstruction, and then 
two steps back with respect to the failure to maintain it. What 
is going on in that----
    Mr. Walker. Well, I think we have a problem with regard to 
planning and execution. Some of the examples have been provided 
here at this hearing already. Another example is that if you 
look, for example, at the health facilities, we have several 
hundred that we've been working on, but we're going to run out 
of money before a vast majority of them are completed.
    I think one of the things we need to be thinking about is 
we've got a limited amount of resources. We need to make sure 
that we target those resources to generate the best results as 
quickly as possible. In some cases, that means building fewer 
in areas where we think we can actually be successful and then, 
after we end up achieving some successes, then focusing on 
other areas over time.
    At the same point in time I will mention to you, as I said 
in my testimony, there's not going to be enough money. 
Additional money is going to be necessary in order to rebuild 
all the areas that need to be rebuilt, and the real question is 
where is it coming from and to what extent are the Iraqis going 
to be able to do it. And they're not going to be able to do it 
all, it's very clear, irrespective of what the price of oil is 
today. And, furthermore, you know, whether and to what extent 
we and others in the international community may step up in 
that regard; the jury is out on that.
    Mr. Van Hollen. Well, let me ask you, you're referring now 
to the $56 billion number you referred to. Where exactly does 
that number come from? Because there are lots of numbers, as 
I'm sure you know, out there with respect to----
    Mr. Walker. I'll ask Mr. Christoff to give you the details.
    Mr. Christoff. The $56 billion was estimated in 2003 by a 
combination of the World Bank, the U.N. and CPA doing a quick 
initial estimate of about--I think all of the sectors, 
including oil and electricity.
    Mr. Van Hollen. And your estimate now is that's a low 
number, is that right, based on your testimony? Do you have any 
idea what the number is?
    Mr. Christoff. We haven't concluded a number. But just the 
events that transpired after that estimate, a great deal of 
looting, higher security costs, plus estimates from both the 
Ministry of Oil and Electricity, that those two ministries 
alone will need $50 billion makes the $56 billion figure----
    Mr. Van Hollen. Clearly, the assumptions that were in place 
at the time of that $56 billion have not proven to be true. 
They were obviously very optimistic assumptions.
    Let me ask you, with respect to the costs of reconstruction 
and the international commitments that have been made to date 
at donors' conferences, do you have any overall numbers 
pledged? And, second, do you have any numbers with respect to 
how many people have followed through with their commitments, 
who has followed through to date, who who has not followed 
through to date?
    Mr. Walker. We have some data on that. I'll ask Mr. 
Christoff to give the details.
    But, as you know, Mr. Van Hollen, a lot of those pledges 
were in the form of loans rather than grants; and we all know 
there is a fundamental difference between a grant and a loan.
    Mr. Christoff. $13.6 billion total that was pledged. I 
think we're up to about $3 billion that has actually come into 
the two trust funds, the U.N. and the World Bank trust funds.
    Mr. Van Hollen. Is that $3 billion of those grants or 
loans, do you know?
    Mr. Christoff. That is grants, and the rest are 
predominantly loans. When I met with the Japanese about a month 
ago, they were on the verge of completing the loan agreement, 
about a $600 million loan agreement with the Iraqi government, 
so that would be probably one of the biggest loans that would 
be coming through if that could be brokered.
    Mr. Van Hollen. But other than the $3 billion, the 
remainder of the pledges have not been made to----
    Mr. Christoff. Well, there are loans that are available 
once the government reaches agreement and once there is a 
government.
    Mr. Van Hollen. Let me followup a little bit on the 
corruption issue, because especially in the oil industry it 
seems to be that the lack of any kind of strong central 
government has allowed a lot of the chiefs of the tribal areas 
and others to take advantage of the situation.
    You may have mentioned it, but I don't know if you're able 
to quantify the amount of revenue lost to the central 
government as a result of corruption. Obviously, it's a 
difficult number to get a hold of. I don't know if you have any 
estimate of what's been lost to the central government.
    Mr. Walker. We don't have a specific estimate, but it is 
very material.
    Mr. Van Hollen. All right.
    As you may have seen, there was an estimate put together by 
Joe Stankiewicz, a Nobel-Prize-winning economist, as to the 
total cost of operations in Iraq--it wasn't just 
reconstruction; it was the total cost by the end of the day--in 
the range of $2 trillion. I don't know if you had an 
opportunity to look at the assumptions made in there and make a 
judgment as to whether that's in the ballpark.
    We all remember early on when Larry Lindsay, President 
Bush's economic advisor, said that the cost might reach $200 
billion--this is before the war--and the administration said, 
oh, no way, it's not going to get anywhere in that ballpark. 
Well, we know that his estimate we should have looked at 
suspiciously, not because it was too high but because it was 
too low. But I don't know if you've had any opportunity to make 
a judgment about the Stankiewicz quote.
    Mr. Walker. No, we haven't had an opportunity to do that.
    Let me just say that, obviously, you would have to make a 
lot of assumptions, including a big one, which is how long are 
we going to be there and in what size and who's going to end up 
helping to fund this capacity building and the reconstruction 
needs over a period of time. I touched in my testimony the fact 
that one has to be careful not just to consider the direct cost 
but also there will be significant costs that will be incurred 
to recapitalize equipment, there is significant costs that will 
be incurred for disability benefits and a number of other 
benefits that will be paid for many years to come.
    Mr. Van Hollen. Right. And, to date, GAO has not tried to 
undertake that kind of----
    Mr. Walker. We have not. I would imagine that CBO may try. 
As you know, the agency in the legislative branch that's 
responsible for trying to run budget numbers for the Congress 
is the CBO, and we try not to compete with them.
    Mr. Van Hollen. Right. Let me ask you about Kirkuk--and I 
don't know--you have a little section in your report on Kirkuk. 
I don't know if you have any sense of the progress being made 
among the parties with respect to resolving the control of 
Kirkuk and control, of course, of the oil revenues that would 
be generated from that oil-rich region.
    Mr. Walker. I would ask Mr. Christoff to address that.
    Mr. Christoff. The constitution basically says it needs to 
be resolved by 2007. It hasn't been resolved.
    Mr. Van Hollen. All right. And any negotiations, to your 
knowledge, that have gone on that would move us in the right 
direction?
    Mr. Christoff. I'm not aware of any on Kirkuk.
    Mr. Van Hollen. All right.
    Mr. Walker. From a practical standpoint, without the 
national unity government being in place, it's probably not 
realistic to expect that there would be a tremendous amount of 
progress. Hopefully, there will be once it is fully in place.
    Mr. Van Hollen. Right. Well, they've tried off and on to 
negotiate the status of the oil revenues through the 
constitution and others. But you're right. I mean, I think that 
while I think it's a hopeful sign that they were able to get a 
prime minister named and some cabinet officials, so far I think 
it would be--you would be looking through rose-colored glasses 
to suggest that we're over the hill in any way, even on the 
political front here, given the strong sectarian divisions in 
Iraq.
    Ambassador Khalilzad said what lots of us said many years 
ago with respect to Iraq, which is that we took the lid off 
Pandora's box; and the challenge in Iraq will always be to 
ensure that Iraqis see themselves, as the chairman said, as 
Iraqis first, as opposed to seeing themselves first as Sunnis, 
Shi'as, Kurds and other ethnic groups within Iraq. And while 
some of the political leadership may have gotten there, I'm not 
sure the great majority of the country has gotten there yet; 
and that, of course, is a big part of the ultimate challenge.
    Thank you, Mr. Chairman.
    Mr. Shays. I thank the gentleman very much.
    I would concur with the gentleman that the political 
challenge in Iraq is huge. And I like using your word 
governance, because it gets down below the political and also 
looks at the everyday operation of the government. So I'm going 
to think more about governance as opposed to the political when 
I divide them into three groups.
    What I do think, though, is that Iraq has an easier 
opportunity of becoming a viable country than the United States 
had. I look at 1776, I look at the Articles of Confederation, I 
look at the Constitution. We had to amend the Constitution 10 
times just to get Virginia to be a part of it.
    And I'm concerned with this, they haven't done it yet in, 
what, 3 years. In 1 year, they had three elections; they 
established a constitution. So all I want to do is establish 
the point that their progress has been huge, but it could blow 
up in their face. And we will learn, how this new government is 
going to perform. It seems to me on the political side of the 
equation, if they don't get at corruption and don't make some 
inroads, then they're going to fail ultimately. That's what I 
think. Corruption has to be dealt with.
    What I would like to get into is the issue of security, and 
I'm going to preface my question in this way. And I'm going to 
say, because I agree with my colleagues, that we totally 
underestimated the challenge. I try to look as objectively as I 
can and as candidly as I can. When we talked about the war 
originally, I honestly in my own mind said we could fund it 
with their oil. The administration rebuked me and said it's not 
going to be with their own oil because then it looks like we're 
going after their oil. It's going to be our own dollars.
    When I came back in August 2003 and said people on the 
ground tell me they don't have any money, and the 
administration came in September with this request of $82 
billion, I was floored by it. I mean, I was floored.
    What I believe is this: that they had plans, but their 
plans were always wrong, and they were constantly always having 
to revise their plan. They always underestimated the challenge.
    When I was speaking with Bernie Kuric, the former police 
chief--and it's somewhat controversial, but he is an expert--he 
told me when he was in Iraq in the early times and the people 
in Baghdad said we are going to disband the army, their police 
and their border patrol, he told me he got right in their face 
and basically said, let me understand something, you are going 
to get rid of their police? Who is going to provide security? 
And his basic comment to me was the folks who made that 
decision never got out of the Green Zone in Baghdad. They never 
got out.
    So my view is that when we disbanded their army, their 
police and their border patrol, we left 24 million people 
defenseless in a country the size of California; and then we 
said to 150,000 coalition forces, you provide the police work, 
the border patrol and you be their army. And then, by the way, 
you train their police, their border patrol and their army. 
That's what I think, and I think we took a huge nose drive.
    So when I talk about progress, I don't look at April, 2003, 
Mr. Walker, and say, OK, we're here now, and it's a trend line 
like this. I look at it with a big drop, and the trend line 
going up--until the bombing in the dome--significantly. We 
started to train their police, their border patrol and their 
army.
    Now this is the area that I want to talk to you about. It's 
my belief--and I will tell you a Democratic colleague from 
Georgia has enlightened me a little bit on this a little bit 
more. It's my belief that the Iraqi military is going to need 
us for a long time. They don't have the sergeants, the 
corporals. They didn't develop middle-level management. They 
don't have the strategic logistic support, as you pointed out. 
I'm emphasizing it. They're not going to be able to man 
helicopters in the next year or two. They don't have 
helicopters, and they're not going to have enough to man. So 
we're going to have to be for that.
    They don't have the medics. They don't have a number of 
things that they need. So I thought, well, that's a bad thing.
    Mr. McGovern said to me, I'm not sure in a country where 
the military has overthrown the government a number of times 
you want to have the military totally independent, totally 
without some embedded forces that basically help guide and 
mentor and make sure that these forces don't become a way to 
overcome democracy. Interesting point he made. He would make it 
better than I've made it.
    I guess my point to you here is, do you believe that there 
has been significant progress with their police, their border 
patrol and Army? If not, why not and where? If you think 
there's been significant progress, do you think they have a 
long ways to go or what?
    Mr. Walker. I think there's been progress. There's been 
more progress with regard to the military than there has with 
the police forces. And I would respectfully suggest that if you 
want to really get a sense as to how performance is going in 
this area or any area you need to look at three dimensions: No. 
1, how are things today; No. 2, how are they trending; and, No. 
3, how do they compare to various other metrics?
    In the case of Iraq, I would suggest at least two, prewar 
and goal. You have to look at all three, how do they stand, how 
are they trending and how do they compare to established 
metrics? Only by looking at all three of those do you really 
get a full and fair view I think of where things are.
    But I would say that much more progress has been made with 
regard to the military forces. Some progress has been made with 
both.
    Mr. Shays. But when you look at the stock market over 3 
years you can say you were here and then you're here; what 
happened in between? Would you agree that when we disbanded 
their army, their police and their border patrol we left them 
basically defenseless and required an unbelievable effort on 
the part of a limited number of troops, 150,000 troops--would 
you agree that taking away their security left them somewhat 
defenseless for a period of time?
    Mr. Walker. Many believe that was a mistake and that it 
created a vacuum and that--and so I understand what you're 
saying, Mr. Chairman. You're saying that from a practical 
standpoint that might have been the truth, that might have been 
the floor. And if you look at that rather than merely prewar, 
then we could be better off than otherwise, one might assert.
    Mr. Shays. I would make that argument.
    Mr. Walker. I understand.
    Mr. Shays. OK. It strikes me, when we talk about security, 
that it's logical to me that reconstruction is not going to 
succeed very well if you can't provide security to which people 
can do their job; and so I put security and I put 
reconstruction in a closer link. And I'm somewhat reluctant to 
talk about this because it's been so successful we don't draw 
attention to it, but the one area that we can see no real 
destruction of any of the investments we've made--and there 
have been thousands of them--are the non-government 
organizations.
    I'm not going to name them, but one non-government 
organization and another that I've interacted with, they hired 
Iraqis to do the work. When things got even dicier, they hired 
Iraqis to be the non-government organization and hire out the 
work. So you had westerners coming in with these non-government 
organizations, and they hired Iraqis, and then when security 
got bad the westerners left, except for one or two, they hired 
Iraqis to contract with Iraqis.
    The testimony that we've had is not one school that they 
built, not one bridge, not one water structure has been 
destroyed; and my sense is that the model was Iraqis doing the 
work. I'd like you to talk about reconstruction as it relates 
to--if you've done any thought or work on this--having Iraqis 
do the work versus our coming in with people from outside doing 
the work.
    Mr. Walker. I'll ask Mr. Christoff to provide some details.
    We have not, to my knowledge, done specific audit work in 
differentiating between those projects that were funded using 
that approach versus another. But if you can imagine, you get 
more ownership, you get more buy-in from the people because 
they were part of the solution.
    Mr. Christoff. You also spend less money.
    And I think one thing we're looking at right now is just 
how we move from the design/build approach that we began with 
under CPA to more direct contracting. And clearly one of the 
lessons learned is that you can employ more Iraqis, you can 
engage more Iraqis, and you eliminate the levels of overhead 
with the subcontractors and sub-subcontractors, and you can 
have a more direct and immediate impact.
    Mr. Walker. We have similar problems in the Katrina 
situation, quite frankly.
    Mr. Shays. Interesting.
    Well, I note that Mr. Ruppersberger is here.
    I guess what I want to conclude this part of my questioning 
with is, intuitively, it strikes me that if you don't have good 
security you're not going to have successful reconstruction, 
particularly with the big projects. So when I hear that we 
haven't been as successful, I say I'm not surprised. I don't 
like it, but it seems to me when we made that fateful decision 
of disbanding their army, their police and their border 
patrol--because I had Iraqis come to me and say, why are you 
putting my brother, my uncle and my father out of work? Why 
can't we at least guard the hospitals? And I didn't have a good 
answer because I don't know why we did it.
    So my point to you is, when you tell me we haven't 
succeeded in these areas, would it have been possible for us to 
succeed without good security?
    Mr. Walker. I think security is much more than 
reconstruction. Clearly, it is one of the major contributors to 
the fact that we haven't made as much progress we would have 
liked and expected to at this point in time.
    But as you know, Mr. Chairman, you and I both, when we were 
in undergraduate school, remember studying Maslow's hierarchy 
of needs; and the most basic thing for any civilization is 
security, self-preservation. And it's not just an issue of 
being able to do reconstruction, it's safe streets. So I think 
that because of some of the decisions that were made in the 
past we created more problems for ourselves and, in some cases, 
for the Iraqi people.
    Mr. Shays. Thank you.
    Mr. Ruppersberger, welcome. You have 15 minutes.
    Mr. Ruppersberger. Fifteen minutes, OK. I can do it 
quicker.
    I just got back about 3 weeks ago from Iraq--more from an 
intelligence point of view on the Intelligence Committee--and 
one of the things that we did was really look and see where we 
were. And one of the things that I saw and what I would hope 
that we would look at--and I want your opinion on this--right 
now, I think the military has come a long way, the Iraqi 
military. We've been training them for, what, about 2\1/2\ 
years now? How many years have we been training the military?
    Mr. Walker. About 2 years. 2004. And I would agree, they've 
come a lot further.
    Mr. Ruppersberger. We've met with military, we've met with 
our people, General Casey. I would think at this point it's 
time that we start moving our troops from the urban areas and 
out to the perimeter, and I think this would accomplish 
something very positive.
    First thing, the Iraqi people need to understand that this 
is their country and that their military--and, hopefully, 
police, even though they're not ready and we know that--that 
their military would start patrolling the streets and start 
letting the Iraqi people see that this is our country, this is 
our military. We still, by doing that, we see over and over, 
every day it seems, or at least once a week--which is very 
unfortunate--that our men and women, mostly National Guard, 
patrolling the urban areas in Iraq are getting blown up by 
either suicide bomb or roadside bomb. If they're not being 
killed, they're being maimed. There is no reason why the Iraqi 
military can't take control of that patrol.
    We move our troops out to the perimeter; and then, by 
doing, that we are standing ready to help them when they need 
us. But they have to learn to do it on their own or they will 
be dependent on us forever, and that's not acceptable because 
eventually we have to start moving out to that area.
    In our perimeter, we have some of the best special 
operations in the world, probably the best in the world. And 
what we're doing now, it seems to me, is that we are really 
engaging the bad guys, so to speak, on their level without 
really a lot of defense for our men and women who are in the 
military. By being in the perimeter, we can use our technology, 
we can use our SIGIR and our intelligence to a better level 
than we could by patrolling the streets, and we can also target 
those areas when, in fact, if the military is having a 
difficult time, they call 911 and we're there. A Blackhawk 
helicopter can get you anywhere in the urban area of Iraq in 
15, 20 minutes.
    I think by doing this we would be able to, No. 1, start 
sending a lot more of our troops home, but we have our key 
operations on the perimeter. We're backing up the Iraqis. We're 
not leaving because they're not ready yet, but they have to 
learn themselves to provide their security.
    What do you think of that theory.
    Mr. Walker. I think there are a number of reasons why it is 
to our benefit for the Iraqis to take the lead as much as 
possible. When we came into Iraq, we were viewed as liberators 
initially. The longer we stay, the more that view is 
challenged.
    I do think that the other thing that we need to do is we 
need to focus on what are the needs of the Iraqi military. And 
even if we train more and more units such that they can take 
the lead, they don't have certain equipment, they don't have 
certain capabilities, they don't have the type of intel, they 
don't have the type of communications, they don't have the lift 
capacity, the transportation capacity. But it's consistent with 
what you're saying, because I think one of the things we need 
to do is to focus on where it's going to be years before they 
have what they need and to target our resources and target our 
efforts to focus on the need but to try to get them to be out 
front as much as possible so that we're providing essential 
support; we're the reserve rather than being up front.
    Mr. Ruppersberger. Well, there's another issue there, too. 
It's the American people, and the American people understanding 
that, what's happening. And we see the poll numbers going down 
right now. By moving to the perimeter, it's an event. It says 
to the American people that we're not just doing the same thing 
every day, that there's nothing really changing. This is a 
major event for us to pull out of urban areas and to back up. 
And what you're saying, we can continue to supply the 
intelligence from the perimeter; we can give them the 
resources. They have a lot of resources now from what my 
briefing said. Yours may have been different. That's No. 1.
    The second thing that really disturbs me a lot, the only 
way that--well, there are two issues. The first thing is that 
the Iraqi government must be formed, and it looks like they're 
getting to that level. If we didn't form an Iraqi government, 
if they didn't form their own government, it would seem to me 
we would have civil war, and once there is civil war we have to 
get out of there. I mean, we can't stay there and deal with the 
issues.
    But I see things there starting to change. I think one 
reason is that the Sunnis understand now that they used to be 
in charge, but they realize that if they're not at the table, 
they will have severe problems with themselves, their children 
and their grandchildren. And I think the Sunnis are starting to 
see that al Qaeda, who they might have had a relationship with, 
especially with Zarqawi, is starting to kill a lot of their own 
people, their own Sunnis; and I think, as a result of that, 
that's one of the reasons why they're coming to the table.
    But I think one of the things that has to be done is that--
not only from our point of view but from their new government 
point of view and from the Iraqi leadership, at this point you 
have to win the hearts and minds of the people; and if those 
people feel that their life was better under Saddam Hussein 
than it was under the present conditions, then we've lost, and 
you're not going to have what we're looking for in Iraq.
    Now, in order to do that, we have to do a lot better in the 
area of infrastructure and dealing with basic things, 
transportation, education, potable water. I mean, these are 
things that need to be done.
    I was very disturbed--I had a briefing with the Army Corps 
of Engineering while we were there about the lack--and this is 
something that I hope you can focus on--is that we have 
American contractors, some they're doing the job, some are not. 
But we have American contractors who have been given contracts, 
and they have not been held accountable for performance, and I 
think it's almost unpatriotic.
    We've heard issues about Halliburton, and there is a lot 
there. There is a construction company right now, a major 
construction company, one of the largest in this country, who 
is contracted to build health centers, which are very relevant 
and very important. And money has been paid to this contractor, 
and yet they are not performing. That's inexcusable and it's 
unacceptable, and I just think that we have to learn from our 
past mistakes.
    Any American company entering into a contract that has been 
given this contract and they are not performing, we have to 
make that an issue; and it is not being made an issue by the 
Department of Defense the way it should be. They're slipping, 
and they're making excuses that, well, it's a security issue.
    Well, there are some contractors over there that are doing 
the job, and there are some that are not. And I would like to 
talk to you after this hearing about this one contracting 
company, which is one of the largest in the country, that have 
walked away, basically, from the issue of health centers, and 
we can't allow that to happen. They should be fined, they 
should be sued, we should do whatever we can to make them 
start--to help them to produce.
    The amount of money that has been wasted, millions and 
maybe billions of dollars has been unaccountable from the 
beginning with the Office of Special Plans, we need to learn 
about that, and we can't have that structure anymore.
    But now that we're trying to fix the infrastructure and 
we're still having problems with our own American contractors, 
I think we need to set up a system to deal with it. What is 
your opinion on that?
    Mr. Walker. My view is that there's been a tremendous 
amount of waste and mismanagement with regard to contracting. 
My view is that, with the Defense Department in particular, 
there have been serious, long-standing systemic problems in the 
contracting area where, irrespective of the results that are 
achieved, that neither the executive branch nor the legislative 
branch has held the appropriate people accountable. That means 
both the contractors and the government officials who are 
responsible.
    Mr. Shays. Would the gentleman suspend for just a second?
    Mr. Ruppersberger. Yes, I will yield.
    Mr. Shays. I would say to you that you give us a list of 
some contractors, some areas within DOD that need a look, and 
we will have a hearing or a series of hearings on that. And the 
sooner you provide it to us the sooner we will do it.
    Mr. Walker. I'll give you a list.
    Mr. Shays. Let me just tell you something. One of the 
things that I think was the problem with choosing Halliburton 
was there was this political effort to say, the Vice 
President--I want to just get that out. I want you--whatever it 
is--if Halliburton is on the list, whatever it is, I want you 
to give this subcommittee a list of things that have just 
irritated you, you're outraged by or whatever, or suspect 
things, we will have a hearing. And I'll pledge to this 
committee that we'll call them in, whatever it is; and let's 
get the politics out it, to the extent that we can, and go for 
it.
    Mr. Walker. I'll do that.
    I'll give you one example where I've had one hearing on the 
Senate side but nothing on the House side yet, and that has to 
do with incentive and award fees, the fact that we issued a 
report in July of last year where the Defense Department paid 
out 91 percent on average of available incentive and award fees 
irrespective of the results as to cost, quality and 
performance. There is a systemic, longstanding problem, and 
it's not just Iraq.
    Mr. Ruppersberger. Does the gentleman yield back?
    Mr. Shays. Yes.
    Mr. Ruppersberger. We agree. And you have to look at both 
sides. To begin with, when we went into Iraq, there were 
probably very few major corporations--and Halliburton is one. 
They've done some good, and they've done some bad, but they 
haven't been held accountable. And when you put these major 
companies that want to make money--I mean, that's what they're 
there for--that they have--there are some companies that would 
not have been able to supply all the linen and all the things 
that we need when we have a force. You need soap, you need 
toilet paper, you need all these issues just to have a force, 
wherever it is. But when they abuse that system and when there 
is not--a lack of accountability, where our fault, both in 
administration and Congress, we didn't set the standards. We 
didn't set the standards, and then we didn't have anybody 
overseeing them and holding them accountable for the standards, 
not only from a performance point of view but also from a 
financial point of view. I mean, performance audits, financial 
audits, it wasn't there. And we got into it, and we allowed the 
corporations to do it, and look what happened.
    But where I'm concerned now--we have to learn from that in 
the past. I'm concerned for right now and where we're going, 
because we want to get our troops out of there as soon as we 
can. We want to try to stabilize that country.
    And what we are seeing now, what I'm seeing, is 
contractors, large and major, that could do the job if they 
wanted to, and they're using as an excuse the security. We can 
provide the security in these certain areas and they can, too, 
and that should be part of their contract to provide their 
security. But when they don't do the job, we should cancel 
every government contract they have over here and leverage it. 
Why are we letting this system go forward where they're abusing 
our equipment and taking our dollars?
    And then, not only that, but I believe when you're over 
there in a war zone, when our men and women are there and 
you're over there as a contractor and you're not producing, 
which slows down our process, it's unpatriotic.
    And I applaud the chairman. I'm not mentioning any names 
now because I don't think it's the right time, but I would love 
to have this hearing. And I think it's very, very important.
    You know, you get so frustrated in having these hearings 
and nothing gets accomplished. We need to start focusing on 
what is going on, who's abusing the process, making sure 
they're being held accountable for performance and the moneys 
they spend. And if they're not doing it we cut them off and we 
penalize them and we aggressively pursue them.
    Mr. Walker. And I think it's important to keep in mind that 
some contractors are doing a very good job----
    Mr. Ruppersberger. Some are.
    Mr. Walker. Some aren't. And some do pluses or minuses. I 
mean, sometimes the same contractor will be successful in some 
areas and not successful in others.
    The last thing I will mention on this is it is a shared 
responsibility. In many cases, part of the problem is exactly 
what you touched on: The government has not done a very good 
job of being specific as to what we're looking for. What are 
the requirements? What are we looking for? In the absence of 
doing that, it's tough to hold people accountable. We've had 
situations where, basically, we've let the contractor define 
what they're going to provide, or where we keep on changing 
what the requirements are such that it's almost impossible for 
the contract to be successful.
    I look forward to having the opportunity to focus on this 
issue, not just with regard to Iraq but with regard to the 
systemic problem, because it's serious.
    Mr. Shays. Well, if a few years ago you couldn't audit one 
trillion transactions--I guess it was more than one trillion, 
wasn't it? I'm going back 4 or 5 years ago--you could not 
audit. There was no audit trail.
    Mr. Walker. The Defense Department remains the single 
largest obstacle to the U.S. Government being able to 
successfully withstand an audit.
    Mr. Shays. Mr. Van Hollen.
    Mr. Van Hollen. Thank you, Mr. Chairman.
    I think it's very important that we do hold hearings in 
that area, and I was pleased to see you want to explore that 
area. Because, in response to your original questions from Mr. 
Waxman, I remember you said that. And I think most people would 
sort of say, well, look, we know we've got problems in Iraq, 
we've heard about the Halliburtons and the other problems in 
Iraq, but to say that it's simply part of a larger problem with 
DOD contracting I think is something that most people are not 
aware of. And I think it's very important that we get to the 
bottom of that, especially given the huge amount of money we 
invest of our taxpayers' money in the area of defense.
    And it does lead to a question I had with respect to the 
role of the Inspector General at DOD. I know it's maybe hard 
for one Inspector General to comment on the performance of the 
other, but it does beg the question if there are all these 
serious problems with respect to contracting at the Department 
of Defense, why is it that the Inspector General at the 
Department of Defense has not uncovered more of these abuses? 
Have they? We just haven't heard about them?
    We know that with respect to Iraq--and we had a hearing in 
this subcommittee a while ago and we learned that because there 
was a special Inspector General created for Iraq the Inspector 
General for DOD decided not to put any people on the ground in 
Iraq, that their reports were based on essentially secondhand 
information--or not information direct, day-to-day on the 
ground. And many of the members of this subcommittee were very 
surprised to learn that they didn't have a presence on the 
ground. We realize that there is a special Inspector General, 
but for the DOD Inspector General not to have people on the 
ground at least as of that time, which was October of last 
year, was something I think shocked many of us.
    So if you could comment on whether that system is broken at 
the Department of Defense, both with respect to Iraq and the 
oversight there, and more generally.
    Mr. Walker. Well, first, you properly point out, Mr. Van 
Hollen, that there is a special Inspector General in Iraq, 
SIGIR, which is referred to for reconstruction. That's not for 
everything. And that comes to the point that you're trying to 
make, is what is really important is that we recognize that 
there are a whole range of needs for oversight and 
accountability, both for positive performance and to assure 
appropriate accountability.
    SIGIR is onsite. They have people both in Iraq as well as 
back here. They have the most front-line presence with regard 
to the accountability community.
    DOD and others have had people there from time to time. We 
have had people there from time to time. We have committed that 
we are going to open an office, a small office, in Baghdad. We 
are in the process of taking steps to be able to do that, to be 
able to have some continuing presence there, to be able to 
project people in from time to time.
    At the time that I was there last, which was the end of 
January, early February, DOD, I do not believe, had a recurring 
presence there. They would send people in from time to time.
    I think you're raising a legitimate point, that there needs 
to be more done in order to assure who is covering what to make 
sure that we are minimizing duplication but also minimizing 
gaps.
    Mr. Van Hollen. Right. Well, I mean, as you point out, the 
SIGIR's responsibility covers the reconstruction effort. The 
bulk of the dollars--although we spent significant money on 
reconstruction, we spent even more on nonreconstruction efforts 
in Iraq in military operations and other procurement efforts 
going on there.
    Frankly, I'm very pleased to hear you're going to have a 
presence on the ground. For us to discover that even to this 
day the Inspector General for the Department of Defense does 
not have people on the ground in Iraq regularly is, I think, 
very disconcerting and something, Mr. Chairman, I think we 
should address as a committee. And I would be happy to defer--
--
    Mr. Shays. Thank you. I just want to say that this was a 
question raised when we had the Inspector Generals, and we 
received notice from the Inspector Generals that in their 
judgment they had made a mistake. They are setting up an 
operation in Kuwait, which to me is fine as long as they then 
are in the theater. If they're in Kuwait, we have operations 
all in that area, in Qatar and elsewhere.
    But what is surprising to me is, when I thought about it, 
their explanation was we have an Inspector General; we don't 
need to be there. But, as you point out, it is only for 
reconstruction. So it was a mistake. They acknowledge it. They 
are there now because of questions you and others raised.
    Mr. Walker. If I could clarify for the record, Mr. Chairman 
and Mr. Van Hollen, we are dedicated to having a physical 
presence in the region. Our presence is Baghdad. We are looking 
at other options. We haven't dotted the I's and crossed the 
T's, but we're committed to having a continuing presence. We 
would prefer the Green Zone in Baghdad.
    Mr. Van Hollen. But just very briefly, since you made what 
I think is a very important point and something the 
subcommittee is going to be following up on with respect to 
contracting and procurement problems, abuses and wastes at the 
Department of Defense, is it that the Inspector General's 
office there is not adequately--does not have adequate work 
force, does not have the resources? I mean, why, given the--why 
are they still on your watchlist? Why are they the No. 1 worst 
performer in the U.S. Government, and why isn't the IG's office 
doing more about it?
    Mr. Walker. Because neither the executive branch nor the 
legislative branch has held DOD accountable for years.
    Mr. Van Hollen. Well, I would agree with you, as I said in 
my earlier remarks, that there has not been adequate oversight 
from Congress, No. 1. No. 2, I would hope--part of the purpose 
of having these independent Inspector Generals in these 
agencies like DOD is so that they have the freedom and the 
autonomy to uncover some of this, and it's disconcerting to 
learn that they have not. I'm drawing my own conclusions based 
on your testimony, but clearly they've not been doing an 
adequate job there.
    Let me just ask one--there was some discussion a while ago 
about the fact that we had contracted out some of the 
interrogation efforts and things connected with torture--in 
fact, a Virginia company, CACI, was one of the ones that 
received that contract. Have you looked into that issue any 
more? Are we still contracting out interrogation services?
    Mr. Walker. I'll followup with regard to that level of 
specificity and provide it for the record.
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    Mr. Walker. But I will tell you that was an example of an 
abuse of an interagency contracting arrangement. It's an area 
that is getting a lot more attention by us. It's a situation 
where there was a contract that was piggy-backed on to provide 
services that were not clearly provided for under that 
contract, and it really kind of puts a face on the overall 
issue.
    Mr. Van Hollen. They were just on some list, as I 
understand, and therefore all of a sudden they were deemed 
eligible to receive this much larger----
    Mr. Walker. Well, I think this is an important point. 
Congress has passed a number of reforms in the contracting area 
which have had positive consequences, but some problems have 
occurred. We have been able to eliminate a lot of paperwork. 
We've been able to get things done quicker. But in some 
situations we provided flexibilities where people have not 
always properly implemented those flexibilities and there have 
been some abuses, and this is one example, and it is one of 
many that are on our high-risk list. The DOD has 14 of 25 high-
risk areas, either direct or indirect; and many of them have 
been on for many, many years.
    Mr. Van Hollen. Well, thank you; and thank you, Mr. 
Chairman. I look forward to pursuing those issues.
    Mr. Shays. I thank you, Mr. Van Hollen.
    Let me just conclude by asking you, Mr. Walker, one, is 
there a question or area we should have gone into that we 
didn't that you want to address? No. 2, I would appreciate just 
a very brief summary of your bottom line point in coming here 
today to make sure that, in the course of our asking these 
questions, we're not losing your bottom line point.
    Mr. Walker. Well, the bottom line--I will repeat my final 
paragraph, which I think sums it up.
    Collectively, Iraq's future requires strong Iraqi 
leadership, sustained U.S. commitment, and a re-engaged 
international community. More needs to be done to help the 
Iraqis help themselves build capable government institutions 
that can deliver real results that benefit all of the Iraqi 
people. All of these steps will be essential in order to 
achieve real success in a reasonably timely and sustainable 
manner.
    Mr. Shays. Thank you. I think that is very helpful 
testimony today. We again applaud the work of you and your 
team. It is highly professional and well respected by Congress. 
Thank you very much.
    Mr. Walker. Thank you.
    Mr. Shays. This hearing is adjourned.
    [Whereupon, at 11:52 a.m., the subcommittee was adjourned.]

                                 
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