Rebuilding Iraq: Actions Needed To Improve Use of Private	 
Security Providers (28-JUL-05, GAO-05-737).			 
                                                                 
The United States is spending billions of dollars to reconstruct 
Iraq while combating an insurgency that has targeted military and
contractor personnel and the Iraqi people. This environment	 
created a need for those rebuilding Iraq to obtain security	 
services. GAO evaluated the extent to which (1) U.S. agencies and
contractors acquired security services from private providers,	 
(2) the U.S. military and private security providers developed a 
working relationship, and (3) U.S. agencies assessed the costs of
using private security providers on reconstruction contracts.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-737 					        
    ACCNO:   A31397						        
  TITLE:     Rebuilding Iraq: Actions Needed To Improve Use of Private
Security Providers						 
     DATE:   07/28/2005 
  SUBJECT:   Americans employed abroad				 
	     Construction contracts				 
	     Contract performance				 
	     Contractor personnel				 
	     Federal agencies					 
	     Federal aid to foreign countries			 
	     Federal employees					 
	     Federal procurement				 
	     Performance measures				 
	     Personnel security policies			 
	     Security services contracts			 
	     Iraq						 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-05-737

                 United States Government Accountability Office

                     GAO Report to Congressional Committees

July 2005

REBUILDING IRAQ

          Actions Needed to Improve Use of Private Security Providers

 On August 5, 2005, the PDF file was revised to correct the graphic in Figure 7
of the report. The right-most bar was increased to represent 4 contracts instead
                                of 3 contracts.

                                       a

GAO-05-737

[IMG]

July 2005

REBUILDING IRAQ

Actions Needed to Improve Use of Private Security Providers

  What GAO Found

The civilian U.S. government agencies and reconstruction contractors in
Iraq that GAO evaluated have obtained security services, such as personal
and convoy security, from private security providers because providing
security to them is not the U.S. military's stated mission. U.S. military
forces provide security for those Department of Defense (DOD) civilians
and contractors who directly support the combat mission. In Iraq, the
Department of State and other federal agencies contract with several
private security providers to protect their employees. Under their
contracts, contractors rebuilding Iraq are responsible for providing their
own security and have done so by awarding subcontracts to private security
providers. As of December 2004, the agencies and contractors we reviewed
had obligated more than $766 million for private security providers. The
contractors' efforts to obtain suitable security providers met with mixed
results, as they often found that their security provider could not meet
their needs. Overall, GAO found that contractors replaced their initial
security providers on more than half the 2003 contracts it reviewed.
Contractor officials attributed this turnover to various factors,
including the absence of useful agency guidance.

While the U.S. military and private security providers have developed a
cooperative working relationship, actions should be taken to improve its
effectiveness. The relationship between the military and private security
providers is one of coordination, not control. Prior to October 2004
coordination was informal, based on personal contacts, and was
inconsistent. In October 2004 a Reconstruction Operations Center was
opened to share intelligence and coordinate military-contractor
interactions. While military and security providers agreed that
coordination has improved, two problems remain. First, private security
providers continue to report incidents between themselves and the military
when approaching military convoys and checkpoints. Second, military units
deploying to Iraq are not fully aware of the parties operating on the
complex battle space in Iraq and what responsibility they have to those
parties.

Despite the significant role played by private security providers in
enabling reconstruction efforts, neither the Department of State, nor DOD
nor the U.S. Agency for International Development (USAID) have complete
data on the costs of using private security providers. Even at the
contract level, the agencies generally had only limited information
readily available, even though agency and contractor officials
acknowledged that these costs had diverted a considerable amount of
reconstruction resources and led to canceling or reducing the scope of
some projects. For example, in March 2005, two task orders for
reconstruction worth nearly $15 million were cancelled to help pay for
security at a power plant. GAO found that the cost to obtain private
security providers and security-related equipment accounted for more than
15 percent of contract costs on 8 of the 15 reconstruction contracts it
reviewed.

United States Government Accountability Office

Contents

  Letter

Results in Brief
Background
Security for Civilians and Contractors in Iraq Is Provided by a Mix of

Military Forces, State Department Security Personnel, and Private Security
Providers

While the Relationship between Security Providers and the Military Has
Improved, Actions Should Be Taken to Further Improve Effectiveness

Agencies Have Limited Capabilities to Assess the Cost Impact of Using
Private Security Providers Expanded Use of Private Security Providers Does
Not Appear to Be

Increasing Attrition among Military Personnel Conclusions Recommendations
for Executive Action Agency Comments and Our Evaluation

1 3 6

10

20

29

35 43 43 45

Appendixes                                                              
                  Appendix I:            Scope and Methodology             49 
                 Appendix II:   Comments from the Department of Defense    58 
               Appendix III:     Comments from the Department of State     61 
               Appendix IV:   Comments from U.S. Agency for International  
                                              Development                  64 
                  Appendix V:   GAO Contacts and Staff Acknowledgements    65 

Table Table 1: Occupational Stop Loss Dates for the Military Services

Figures	Figure 1: Figure 2:

Figure 3:

Figure 4: Figure 5:

The Complex Battle Space in Iraq 8
Incidence of Attacks against Civilians and Infrastructure
Targets between June 2003 and April 2005 15
Number of Security Providers Employed on
ReconstructionContracts Awarded in 2003 and Reviewed
by GAO 17
National Reconstruction Operations Center, Baghdad,
Iraq 23
Locations of the Regional Reconstruction Operations
Centers in Iraq 24

Contents

Figure 6: Process for Requesting Assistance through the ROC 26

Figure 7:	Percentage of Total Contract Billings Accounted for by Security
Subcontractor Expenses as of December 31, 2004 33

Figure 8:	Average Attrition Rates for Military Occupational Specialties
Preferred by Private Security Providers which Experienced Increased
Attrition in Fiscal Year 2004 39

Figure 9: Army Special Forces Attrition Rates 41

Figure 10: Continuation Rates for Army Enlisted Special Operations
Personnel with 14 through 19 Years of Service for Fiscal Years 2000
through 2004 42

Abbreviations

CENTCOM U.S. Central Command
CPA Coalitional Provisional Authority
DFARS Defense Federal Acquisition Regulation Supplement
DMDC Defense Manpower Data Center
DOD Department of Defense
GAO Government Accountability Office
MNC-I Multi-National Corps-Iraq
MNF-I Multi-National Force-Iraq
PCO Project and Contracting Office
ROC Reconstruction Operations Center
USAID U.S. Agency for International Development

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.

A

United States Government Accountability Office Washington, D.C. 20548

July 28, 2005

Congressional Committees

The United States is spending billions of dollars to reconstruct Iraq
while at the same time is engaged in combating an insurgency that has
targeted military personnel, contractors, and the Iraqi people. According
to the Department of Defense (DOD) and other sources, as of June 1, 2005,
more than 1,600 U.S. and coalition military forces and 200 contractor
personnel have been killed since major combat operations ended in May
2003. This uncertain security environment created a need for U.S.
government agencies and contractors involved in rebuilding Iraq to obtain
substantially more security services than is normally the case when
operating in other countries. Creating a democratic Iraq and rebuilding
its infrastructure is a U.S. national security and foreign policy
priority, and, even without the need for enhanced security, is a
challenging and complex effort.

Prior to the conflict, DOD and the U.S. government agencies responsible
for the reconstruction of Iraq believed that reconstruction would take
place in an environment with little threat from insurgents or terrorists.
By June 2003 the security situation in Iraq began to worsen and it became
clear in August 2003, with the bombing of the United Nations complex, that
insurgents were targeting nonmilitary targets. The killings of four U.S.
citizens working for a U.S. security provider in Iraq in March 2004 and
the allegations of prisoner abuse at Abu Ghraib prison1 resulted in
significant congressional concern2 over the use of private security
providers in Iraq and raised a number of operational, legal, and
contracting questions.

1 We recently discussed breakdowns in the procurement process when
contracting for interrogators and other services in Iraq. See GAO,
Interagency Contracting: Problems with DOD's and Interior's Orders to
Support Military Operations, GAO-05-201 (Washington, D.C.: Apr. 29, 2005).

2 These concerns have been expressed in requests from numerous members of
Congress that the Comptroller General review the operational, legal, and
contracting issues involving the use of private security providers in
Iraq. Congress has subsequently included several provisions in legislation
designed to improve the management of and support and protection provided
to contractor personnel who support deployed forces or who are in a
combatant commander's area of responsibility. See Ronald W. Reagan
National Defense Authorization Act for Fiscal Year 2005, Pub. L. No.
108-375, section 1205 and 1206 (Oct. 28, 2004) and H.R. 1815, 109th Cong.
title XVI (2005).

Because of the broad level of interest by Congress in issues dealing with
Iraq, the Comptroller General initiated this review under his statutory
authority. Specifically, we evaluated the extent to which (1) U.S.
government agencies and contractors working in Iraq have acquired security
services from private providers; (2) the U.S. military and private
security providers in Iraq have developed a cooperative working
relationship; and (3) U.S. government agencies assessed the costs
associated with using private security providers on reconstruction
contracts. Additionally, we assessed the impact of the increased use of
private security providers on attrition in key military skills.

To identify the rules and regulations governing and assigning
responsibility for protecting government and contractor personnel working
in Iraq, we reviewed policies, regulations, instructions, guidance, and
orders issued by DOD, the U.S. Central Command (CENTCOM),3 and other DOD
components relating to the use of contractors during wartime; orders and
policies issued by the Coalition Provisional Authority (CPA) regarding
contractor operations in Iraq; and Department of State policies regarding
the protection of U.S. government employees working abroad, including the
Foreign Affairs Manual. We also interviewed military officials who had
been stationed in Iraq as well as selected private security providers to
understand their responsibilities and collaborative working relationship
in Iraq. To understand the process by which contractors obtained private
security providers, we selected 16 reconstruction contracts using a
nonprobabilistic methodology that considered such factors as the awarding
agency; the year awarded; the contract's expected dollar value; and the
type, nature and location of the reconstruction activity. These 16
contracts were awarded by various DOD components, including the U.S. Army
Corps of Engineers; the Department of State; and the U.S. Agency for
International Development (USAID). Nine of these contracts were awarded in
2003 and 7 were awarded in 2004. As of December 2004, the agencies had
obligated about $8.6 billion on these contracts. We also obtained and
reviewed six contracts that had been awarded the U.S. Army Corps of
Engineers, the Department of State, USAID, and by Army activities on
behalf of the CPA for the protection of their personnel and facilities in
Iraq. We then compared the type of security-related requirements
incorporated within U.S. government contracts with those incorporated into
contracts awarded to prime reconstruction contractors and, in turn, to
subcontracts with security providers. We interviewed

3 CENTCOM is the U.S. military command responsible for prosecuting the war
in Iraq.

agency and contractor officials, reviewed agency guidance provided to the
contractors, reviewed the reconstruction contracts and security
subcontracts, and analyzed the vouchers and other billing information
submitted by the reconstruction contractors and security providers. To
assess the impact on military attrition caused by the use of private
security providers we obtained and analyzed DOD attrition data and spoke
with private security providers and representatives of the U.S. Special
Operations Command and the military services. We determined that the
information and data discussed in this report were sufficiently reliable
for the purposes of the report. Appendix I contains more detail on our
scope and methodology. We conducted our review from May 2004 to June 2005
in accordance with generally accepted government auditing standards.

Results in Brief	All but one of the civilian U.S. government agencies and
reconstruction contractors we evaluated that are operating in Iraq have
obtained security services from private security providers. As of December
2004, the agencies and contractors we reviewed had obligated more than
$766 million for private security providers. The use of private security
providers reflects the uncertain security environment that was, and is
still being encountered in Iraq, as well as the fact that providing
security for agencies and contractors is not part of the U.S. military's
stated mission. U.S. military forces in Iraq provide security only for
those DOD civilians and contractors who directly support the military's
mission. In Iraq, as elsewhere, the U.S. Ambassador, as Chief of Mission,
has overall responsibility for the security of U.S. government executive
branch employees, except for those under the force protection of the
combatant commander. However, individual U.S. government agencies have had
to arrange for their own security services. As neither DOD nor the
Department of State is responsible for providing security to
reconstruction contractors, the terms of their contracts require
reconstruction contractors to provide for their own security; and, they
typically have done so by awarding subcontracts to private security
providers. The contractors' efforts to obtain suitable security providers
met with mixed results, as many subsequently found that their initial
security providers could not meet their needs. Overall, we found that
contractors replaced their security providers on five of the eight
reconstruction contracts awarded in 2003 that we reviewed.4 Contractor
officials attributed this turnover to

4 On one additional 2003 contract, the contractor provided its own
security.

various factors, including their lack of knowledge of the security market
and of the potential security providers, and the absence of useful agency
guidance.

Although the U.S. military and private security providers generally have
developed a cooperative working relationship, actions can be taken to
further improve its effectiveness. The relationship between the military
in Iraq and employees of private security providers is one of coordination
and cooperation, not control. Both U.S. Central Command officials and
military personnel previously stationed in Iraq told us that there is no
command and control relationship between the military and private security
provider employees. At the same time, military and private security
provider employees recognize the need to coordinate their actions. Prior
to October 2004, coordination was informal, based on personal contacts
often initiated by the contractors, and it was inconsistent. In October
2004, the Project and Contracting Office opened the Reconstruction
Operations Center to share intelligence and coordinate military contractor
interactions. While providers and the military agree that coordination has
improved since the advent of the operations center, some problems remain.
First, private security providers continue to report incidents occurring
between themselves and the military when they approach military convoys
and checkpoints. Second, the military may not have a clear understanding
of the role of contractors, including private security providers, in Iraq
and of the implications of having private security providers on the battle
space.

Despite the significant role played by private security providers in
enabling reconstruction efforts to proceed, neither the Department of
State, nor DOD, nor USAID-the principal agencies responsible for Iraq
reconstruction efforts-have complete data on the costs associated with
using private security providers. In turn, the Department of State's
quarterly report to Congress, which describes the status of projects,
initiatives, and funding dedicated to Iraq reconstruction, does not
provide information on the costs associated with using private security
providers. Our discussions with agency officials found that the financial
management and information systems used to prepare the reports are not set
up to track security costs that are incurred under reconstruction
contracts. Even at the contract level, the agencies generally had only
limited information readily available on the costs associated with private
security providers. While agencies do not specifically track such costs,
both agency and contractor officials acknowledged that security costs had
diverted a considerable amount of reconstruction resources and led to
canceling or reducing the scope of certain reconstruction projects. For
example, in

March 2005, USAID cancelled two electrical power generation-related task
orders totaling nearly $15 million to help pay for increased security
costs being incurred at another power generation project in southern
Baghdad.

Our review of 16 reconstruction contracts found that the cost to obtain
private security providers and security-related equipment can be
considerable. Overall, these costs accounted for more than 15 percent on 8
of the 15 reconstruction contracts for which data were available. On only
4 of those 8 contracts, however, did the agencies receive security cost
information. Agency officials noted that increased costs or delays in
reconstruction projects also reflect non-security-related factors, such as
changes in planned funding levels or higher material costs.

While both Special Forces and military police officials believe that
attrition is increasing in their military specialties, partially because
of increased employment opportunities with private security providers, our
review of DOD data shows that the attrition levels in fiscal year 2004
increased compared to fiscal years 2002 and 2003, but are similar to the
levels seen in fiscal years 2000 and 2001, prior to the establishment of
stop loss.5 This similarity indicates that former military members in the
Special Forces and military police communities are leaving in the same
proportions as before the attacks of September 11, 2001 but, according to
Army officials, have a wider range of employment opportunities today.
However, given that stop loss policies depress attrition rates, we are
unable to determine whether the increase in attrition rates in fiscal year
2004 compared to fiscal years 2002 and 2003 was due to the end of stop
loss or to actual increases in attrition. Moreover, DOD data does not
indicate why personnel are leaving the military-only the fact that they
are doing so.

We are making recommendations to the Secretary of Defense to enhance
military procedures to reduce incidences of the military firing on private
security providers and provide training to U.S. military forces on the
role of private security providers in Iraq. Additionally, we are making
recommendations to the Secretary of Defense, the Secretary of State and
the Administrator, USAID, which would enable contractors to obtain
adequate security services, as well as enable government agencies to more
efficiently plan for security costs in future reconstruction efforts.

5 Stop loss prevents servicemembers from leaving the service even though
they may have reached the end of their enlistment or service obligation.

DOD agreed with each of the recommendations, noting that it welcomed our
assistance in improving how DOD and its contractors can plan for and
effectively execute contracts in a complex and changeable security
environment. DOD's comments appear in appendix II.

The Department of State disagreed with our recommendation to explore
options to assist contractors in obtaining private security services,
citing concerns that the government could be held liable for performance
failures and noting it was unclear that a government-managed security
contractor program would result in enhanced contractor security. While our
work found that contractors had difficulty in obtaining security providers
that met their needs and that they would have benefited from the agencies'
assistance, we did not recommend a particular course of action nor
recommend a government-managed security program. Rather, we recommended
that the Department, working jointly with DOD and USAID, explore options
to assist contractors that are unfamiliar with obtaining the type of
security services needed in Iraq. Such an effort would necessarily entail
a thorough assessment of the advantages, disadvantages and risk mitigation
strategies of the potential options. The Department did not indicate
whether it agreed with our recommendation to establish a means to account
and plan for security costs. The Department's comments appear in appendix
III.

USAID found the report factually correct, but did not comment on the
recommendations. USAID's letter appears in appendix IV.

Background	The United States, along with its coalition partners and
various international organizations and donors, has continued to support
efforts to rebuild Iraq in the aftermath of the war that replaced Iraq's
previous regime. From April 2003 to June 28, 2004, the CPA served as
Iraq's interim government and was responsible for overseeing, directing,
coordinating, and approving rebuilding efforts. With the establishment of
Iraq's interim government, the CPA ceased to exist and its
responsibilities were transferred to the Iraqi government or to other U.S.
agencies. The Department of State is now responsible for overseeing U.S.
efforts to

rebuild Iraq. DOD's Project and Contracting Office (PCO)6 and the U.S.
Army Corps of Engineers have played a significant role in awarding and
managing reconstruction contracts. USAID has been responsible for various
reconstruction and developmental assistance efforts, including those
related to capital construction projects, local governance, economic
development, education, and public health.

As figure 1 demonstrates, the battle space in Iraq can best be described
as complex. A complex battle space is one where military forces, civilian
U.S. government agencies, international organizations, contractors,
nongovernmental organizations, and the local population share the same
geographical area.

6 In May 2004, the President signed National Security Presidential
Directive 36, which established the PCO as a temporary organization within
DOD. The PCO provides acquisition and project management support for the
reconstruction effort in Iraq. PCO personnel in Iraq are permanently or
temporarily assigned under the Chief of Mission authority.

include Kurds and Arabs from Iraq. Generally, private security providers
provide the following services:

o  Static security - security for housing areas and work sites.

o  Personal security details - security for high-ranking U.S. officials.

o 	Security escorts - security for government employees, contractor
employees, or others as they move through Iraq.

o 	Convoy security - security for vehicles and their occupants as they
make their way into Iraq or within Iraq.

o  Security advice and planning.

The CPA issued a number of orders or memoranda to regulate private
security providers and their employees working in Iraq. Among these are
CPA Order number 3, (Revised)(Amended) which described the types of
weapons that can be used by private security providers; CPA Order number
17 (Revised), which stated that contractors (including private security
providers) will generally be immune from the Iraqi legal process for acts
performed in accordance with the terms and conditions of their contracts;
and CPA memorandum number 17, which stated that private security providers
and their employees must be registered and licensed by the government of
Iraq.

According to security industry representatives we contacted, there are no
established U.S. or international standards that identify security
provider qualifications in such areas as training and experience
requirements, weapons qualifications, and similar skills that are
applicable for the type of security needed in Iraq. Some security industry
associations and companies have discussed the need for and desirability of
establishing standards, but as of March 2005 such efforts are only in the
preliminary stages of development.

  Security for Civilians and Contractors in Iraq Is Provided by a Mix of
  Military Forces, State Department Security Personnel, and Private Security
  Providers

U.S. civilian government agencies and reconstruction contractors have had
to contract with private security providers because it is not part of the
U.S. military's stated mission to provide security to these organizations.
U.S. forces in Iraq provide security to contractors and DOD civilians who
support military operations. The Ambassador is charged with generally
ensuring the security of most executive branch employees in Iraq.
Government agencies have contracted with a number of private security
providers to provide personnel, escort, and site security. Reconstruction
contractors are generally responsible for providing for their own security
according to the terms of their contracts, and they have generally done so
by contracting with private security providers. The contractors' efforts
to obtain suitable security providers have met with mixed results. More
than half of the contractors awarded contracts in 2003 replaced their
security providers. Contractor officials attributed this turnover to
various factors, including the contractors' need to acquire security
services quickly, their lack of knowledge of the security market and
potential security providers available to provide the type of security
services required in Iraq, and the absence of useful agency guidance.
Finally, while the U.S. military is not responsible for providing security
for civilian agencies and reconstruction contractors, it does provide some
services, such as emergency medical support, to U.S. government-funded
contractors.

    The U.S. Military Provides Security for Civilians and Contractors Who Deploy
    with the Force

The stated mission of U.S. military forces in Iraq is to establish and
maintain a secure environment, allow the continuance of relief and
reconstruction efforts, and improve the training and capabilities of the
Iraq Security Forces. As part of this mission, U.S. forces in Iraq provide
security for DOD civilians who deploy with the force, non-DOD U.S.
government employees who are embedded with the combat forces and
contractors who deploy with the combat force. Among the contractors who
deploy with the force are those that provide maintenance for weapon
systems, those who provide linguistic and intelligence support to combat
forces, and those who provide logistics support. Contractors who deploy
with the force generally live with and directly support U.S. military
forces and receive governmentfurnished support similar to that provided to
DOD civilians.

According to CENTCOM officials, the military uses soldiers rather than
private security providers to provide security to contractors, civilians,
facilities, or convoys which support combat operations because of concerns
regarding the status of security personnel under the law of international
armed conflict. This body of law considers contractors who

deploy with the force generally to be noncombatant civilians accompanying
the force who may not take a direct part in hostilities. CENTCOM is
concerned that using armed private security employees to protect clearly
military activities would risk a change in status for these contractors
from noncombatants to illegal combatants. Thus, the private security
employees could lose the protections otherwise granted contractors
accompanying the force under international law.

At the time we published our report, DOD was in the process of
establishing its first departmentwide policy on the military's security
responsibilities for contractor personnel. The draft directive and
instruction specify that the military shall develop a security plan for
protection of contractor personnel and the contracting officer shall
include in the contract the level of protection to be provided to
contractor personnel. In appropriate cases, the combatant commander shall
provide security through military means, commensurate with security
provided DOD civilians. In May 2005, DOD also issued a new standard
contract clause in the Defense Federal Acquisition Regulation Supplement
(DFARS), to be included in all DOD contracts involving support to deployed
forces stating that the Combatant Commander (for example, the CENTCOM
Commander) will develop a security plan to provide protection, through
military means, of contractor personnel engaged in the theater of
operations unless the terms of the contract place the responsibility with
another party.7 Prior to the issuance of the new contract clause, the
Army's policy expressly required Army commanders to provide security for
deployed contractors, while the Air Force's policy gave the Air Force the
option of whether or not to provide force protection to Air Force
contractors. It is important to note, however, that the proposed DOD
departmentwide policy, procedures and standard contract clause do not
cover non-DOD government contractors who may be in a military theater of
operations. As discussed in the following, these contractors are
responsible for providing their own security.8

7 DFARS Subpart 225.74.

8 In response to public comments on the proposed new DFARS clause for
contractor personnel supporting a force outside the United States, DOD
stated that the new clause does not apply to nation building efforts such
as the reconstruction of Iraq. See 70 Fed. Reg. 23791.

    Civilian U.S. Government Agencies Provide for Their Own Security in Iraq

The State Department is responsible for the security of most of the
executive-branch U.S. Government employees located in Iraq.9 According to
the President's Letter of Instruction, the U.S. Ambassador, as Chief of
Mission, is tasked by the President with full responsibility for the
safety of all United States government personnel on official duty abroad
except those under the security protection of a combatant commander or on
the staff of an international organization. The embassy's Regional
Security Officer is the Chief of Mission's focal point for security issues
and as such establishes specific security policies and procedures for all
executive branch personnel who fall under the Chief of Mission's security
responsibility.

In June 2004, representatives10 from the Department of State and DOD
signed two memoranda of agreement to clarify each department's security
responsibilities in Iraq. Among other things the agreements specify that

o 	In general, the Chief of Mission is responsible for the physical
security, equipment, and personnel protective services for U.S. Mission
Iraq;11

o 	The Commander, CENTCOM is responsible for providing for the security of
the International Zone as well as regional embassy branch offices
throughout Iraq;

o 	Military capabilities may be requested by the Chief of Mission to
provide physical security, equipment, and personal protective services
only when security requirements exceed available Marine Security Guard
Detachment, Department of State Diplomatic Security Service, and
Department of State contracted security support capabilities;

9 We recently discussed the Department's efforts to protect U.S. officials
working abroad. See GAO, Overseas Security: State Department Has Not Fully
Implemented Key Measures to Protect U.S. Officials from Terrorist Attacks
Outside of Embassies, GAO-05-642 (Washington, D.C.: May 9, 2005).

10 One memorandum was signed by the Deputy Secretary of Defense and the
Deputy Secretary of State, the second was signed by the Ambassador to Iraq
and the Combatant Commander, U.S. Central Command. The first memorandum
deals with security assistance, the second with security responsibilities.

11 All executive branch agencies in Iraq are part of U.S. Mission Iraq
except those which fall under the command of the CENTCOM commander.

o 	U.S. forces will provide force protection and Quick Reaction Force
support outside the International Zone, to the extent possible, for
Embassy personnel and activities; and

o 	The Ambassador has security responsibility for DOD personnel under the
authority of the Chief of Mission. This includes the Marine Security
Detachment and personnel working for the PCO.

In Iraq, the State Department, USAID, the U.S. Army Corps of Engineers,
and the CPA12 contracted with commercial firms to provide security. Our
review of six agency-awarded security contracts, awarded between August
2003 and May 2004, showed that as of December 31, 2004, the agencies had
obligated nearly $456 million on these contracts. In turn, the private
security providers had billed the agencies about $315 million by that date
for providing various services, including personal security details;
security guards; communications; and security management. The companies
providing security for U.S. government agencies may be U.S. or foreign.
For example, while USAID contracted with a U.S. firm, the U.S. Army Corps
of Engineers and the PCO are using British companies to meet their
security requirements. Security for the Ambassador is provided by a U.S.
company, and only U.S. citizens are used to provide protection.

Security providers who provide security for executive branch employees
follow the procedures and policies established by the Regional Security
Officer. For example, one security provider told us that the Regional
Security Officer recently increased the number of cars required for moving
people within Iraq. The provider's representative told us that they were
obligated to comply with the Regional Security Officer's instructions even
though the contract was not awarded by the State Department and the
company does not provide security for State Department personnel.

    Contractors Rebuilding Iraq Obtained Their Own Security with Little
    Assistance from the Agencies

Contractors engaged in reconstruction efforts were generally required to
provide for their own security, and they have done so by awarding
subcontracts to private security providers. Contractors did not anticipate
the level of violence eventually encountered in Iraq and found themselves
needing to quickly obtain security for their personnel, lodgings, and work
sites. As of December 31, 2004, our review of 15 reconstruction contracts

12 A U.S. Army contracting activity awarded several security contracts on
behalf of the CPA.

for which we had data found that the contractors had obligated more than
$310 million on security subcontracts, and in turn, the security providers
had billed the contractors more than $287 million. The contractors'
efforts to obtain suitable security providers met with mixed results, as
many subsequently found that their security provider could not meet their
needs. Overall, we found that contractors replaced their security
providers on five of the eight reconstruction contracts awarded in 2003
that we reviewed.13 This was attributable, in part, to the contractors'
need to acquire security services quickly, their lack of knowledge of the
security market and potential security providers available for the type of
security services required for Iraq, and the absence of useful agency
guidance. Information reflected in the agencies' own contracts for
security, such as training and weapons qualifications requirements, could
have assisted the contractors in identifying potential criteria for
evaluating security providers and in structuring their subcontracts.

Agency officials expected that the post-conflict environment in Iraq would
be relatively benign and would allow for the almost immediate beginning of
reconstruction efforts. During a discussion with DOD we were told that
this expectation was based on determinations made at the most senior
levels of the executive branch and the contracting officials were bound to
reflect that expectation in their requests for proposals. Consequently,
they made few or no plans for any other condition. Reconstruction
contractors shared this perspective, relying upon the language in the
agency requests for proposals and the comments of agency representatives
at pre-proposal and other meetings. Our discussions with contractor
officials found that they anticipated providing for only a minimal level
of security under their contracts, such as hiring guards to prevent theft
and looting at residential and work sites. In one case, the contractor
expected that the military would provide security for its personnel.

Our review of the agencies' request for proposals and other documents
found that they were consistent with this expectation. For example, our
review of five contracts awarded by late July 2003, including four awarded
by USAID and one awarded by the U.S. Army Corps of Engineers, found that

o 	USAID's requests for proposals instructed the contractors that work was
to begin only when a permissive environment existed. Contractors

13 On one additional 2003 contract, the contractor provided its own
security.

were given little guidance concerning security for their personnel and
facilities and were not asked to estimate security costs as part of their
proposals.

o 	The U.S. Army Corps of Engineers' request for proposal noted that the
military was expected to provide security for the contractor and, thus,
the contractor was not required to propose any security costs.

According to agency and contractor officials, the Iraqi security
environment began to deteriorate by June 2003, although two contractors
noted that the bombing of the United Nations compound in August 2003 made
it apparent that the insurgency was beginning to target nonmilitary
targets (see figure 2).

Figure 2: Incidence of Attacks against Civilians and Infrastructure
Targets between June 2003 and April 2005 Number of reported incidences

Jun. Jul.

 Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov.
                            Dec. Jan. Feb. Mar. Apr.

2003 2004 2005 Year

Infrastructure Civilians Source: GAO Analysis of data supplied by DOD.

Contractor officials told us that as the security environment worsened
they unexpectedly found themselves in immediate need of enhanced security
services. These officials told us that they received little guidance from
the agencies relative to possible security providers. We found that the
contractors' efforts to obtain security providers often met with mixed
results. For example:

o 	One contractor, awarded a contract by the U.S. Army Corps of Engineers,
expected that the U.S. military would provide security for its personnel.
That contractor expressed concern, however, that the military protection
being provided was insufficient to ensure its employees' safety and to
allow for the performance of its mission and subsequently stopped work at
one of its locations. In June 2003, the Army finally told the contractor
that it did not have adequate forces to continue to provide security as
promised, and advised the contractor to acquire its own security.
Following a limited competition,14 the contractor awarded a subcontract to
a security provider in June 2003. In this case, the contractor has been
satisfied with the services provided and retained the security provider
when the contractor was subsequently awarded another reconstruction
contract in June 2004.

o 	One USAID reconstruction contractor told us it quickly awarded a
noncompetitive subcontract to a security provider in July 2003. Within
three months, the security company notified the reconstruction contractor
that it was pulling its employees out of the country. As a former
prisoner-transport service firm trying to expand into the protective
services area, it discovered it lacked sufficient capacity to fulfill its
contract requirements in Iraq. The reconstruction contractor subsequently
conducted a competition among security providers already operating in Iraq
to meet its needs.

o 	Another reconstruction contractor initially hired a security service
provider in October 2003. A contractor official stated that it soon became
apparent that the security provider did not have the capacity to meet its
security needs. As a result, the contractor awarded another subcontract,
on a sole-source basis, to a security provider to augment the security
services provided to its personnel.

14 Pursuant to FAR Part 44, subcontracts are generally required to be
awarded competitively, to the maximum practicable extent. The contractor
prepared a justification, which was, in turn, approved by the contracting
office.

o 	Three of the reconstruction contractors we reviewed hired a newly
established security provider company that was marketing itself in Iraq in
mid-to late 2003. Officials representing one contractor told us that the
provider was the only known provider capable of meeting their needs;
officials for another contractor told us that they selected the provider
based, in part, on its reputation. Each of the contractors, however, for
various reasons, replaced the security provider. Subsequently, this
security provider has been suspended from receiving further government
contracts due to allegations of fraudulent billing practices.

Overall, we found that five of the eight reconstruction contractors that
were awarded contracts in 2003 that we reviewed replaced their initial or
second security provider with another company, while in other cases, the
contractors needed to augment the security services provided by their
initial provider. As shown in figure 3, two contractors have awarded up to
four contracts for security services.

Figure 3: Number of Security Providers Employed on Reconstruction
Contracts Awarded in 2003 and Reviewed by GAO

Providers 5

4

3

2

1

0 A BCDEF GH Contract

Security providers retained Security providers not retained

Source: GAO analysis of security provider subcontracts provided by
reconstruction contractors.

Contractor officials attributed this turnover to various factors,
including the urgent need to obtain security, the increasing threat level,
their lack of knowledge of potential sources and the security market, and
the absence of useful agency guidance. In this latter regard, the detailed
standards and requirements in their own agency security contracts may have
provided useful assistance to reconstruction contractors in identifying
potential criteria for evaluating security providers and in structuring
their subcontracts. For example, the USAID security services contract,
awarded in August 2003, contained

o 	a detailed and required organization structure to be used by the
contractor, with titles, duties and responsibilities of various levels of
security providers specified;

o 	requirements for background checks on potential employees and
provisions for agency approval and acceptance of those employees;

o  detailed standards of conduct for contractor employees;

o  language, health, and training requirements;

o  weapons capability requirements; and

o  instructions regarding providing armored vehicles.15

Our review of five other agency security contracts awarded directly to
private security providers from December 2003 through May 2004 for the
protection of agency personnel in Iraq found that, to varying degrees,
most of the cited areas were addressed. Conversely, our review of the
subcontracts awarded by the reconstruction contractors to their security
providers generally contained far less information.

According to most contractor officials with whom we spoke, information
similar to that included in the agency's contracts would have assisted
them in defining their security needs and structuring their security
subcontracts.

15 USAID awarded its security contract on a sole-source basis citing an
urgent and compelling need. In January 2005, the USAID Inspector General
found, however, that in its efforts to award the contract quickly, USAID
failed to adequately document the selection of the security provider and
the purchase of armored vehicles that did not meet U.S. government
standards. USAID generally agreed with the Inspector General's findings
and is taking corrective actions.

Some contractor officials also noted that agency assistance with
identifying and vetting potential security provider companies would have
been very useful or would be useful in future similar situations. They
discussed the possibility of a qualified vendors list, or, if time
permitted, the establishment of a multiple award schedule of qualified
security providers, which contractors could use to quickly contract for
their security needs through competitive task orders.16

Agency officials believed that information regarding personnel
qualifications and competent providers could be made available to
contractor personnel in future efforts, especially if the information was
provided for the contractor's consideration, rather than being a contract
requirement. For example, one agency official noted that his agency's
requests for proposals for security services are publicly available. Some
officials believed that making information a contractual requirement would
infringe upon the contractor's privity of contract with its subcontractors
and might pose a potential government liability should such requirements
later prove inadequate. Other officials believed that it should be the
contractor's responsibility to research and decide for itself its own
needs and sources of security services without assistance from the
government.

    DOD Provides Emergency Quick Reaction Forces and Other Services to
    Contractors in Iraq

According to U.S. officials and contractor personnel we interviewed, U.S.
military forces in Iraq will provide, when assets are available, emergency
quick reaction forces to assist contractors who are engaged in hostile
fire situations. The military is also providing other support services to
U.S. government-funded contractors, to include private security providers.
For example, U.S. military forces will assist with the recovery and return
of contractor personnel who have been kidnapped or held hostage.
Additionally, the U.S. military also provides medical services above the
primary care level to contractors. These services include hospitalization,
as well as laboratory and pharmaceutical services, dental services, and
evacuation services, should the patient require them. In addition, the
military is providing medical support to private citizens, third country
nationals, and foreign nationals when necessary to save life, limb, or
eyesight. Finally, contractors are entitled to receive mortuary affairs
services. DOD is providing these services pursuant to authorities under
Title 10,

16 For example, the General Services Administration currently maintains a
multiple award schedule that federal agencies can use to obtain various
types of security services within the United States.

United States Code, as well as a variety of DOD Directives, a June 2004
support agreement between DOD and the Department of State, National
Security Presidential Directive 36 (which governs the operations of the
U.S. government in Iraq) and specific contract provisions.

  While the Relationship between Security Providers and the Military Has
  Improved, Actions Should Be Taken to Further Improve Effectiveness

The military and the private security providers in Iraq have an evolving
relationship based on cooperation and coordination of activities and the
desire to work from a common operating picture. However, U.S. forces in
Iraq do not have a command and control relationship with private security
providers or their employees. Initially, coordination between the military
and private security providers was informal. However, since the advent of
the Reconstruction Operations Center in October 2004, coordination has
evolved into a structured and formalized process. While contractors and
the military agree that coordination has improved, some problems remain.
First, private security providers continue to report incidents between
themselves and the military when approaching military convoys and
checkpoints. Second, military units may not have a clear understanding of
the role of contractors, including private security providers, in Iraq or
of the implications of having private security providers in the battle
space.

    U.S. Forces Do Not Have Command and Control over Private Security Providers
    Working In Iraq

According to CENTCOM officials and military personnel who have been
stationed in Iraq, U.S. military forces in Iraq do not have a command and
control relationship with private security providers or their employees.
According to a DOD report17 on private security providers working in Iraq,
U.S. military forces in Iraq have no command and control over private
security providers because neither the combatant commander nor his

17 DOD report to Congressional Defense Committees as required by the
Ronald W. Reagan National Defense Authorization Act for fiscal year 2005,
Pub. L. No. 108-375, section 1206 (Oct. 28, 2004).

forces have a contractual relationship with the security providers.18
Instead, military and security provider personnel who served in Iraq
described a relationship of informal coordination, where the military and
private security providers meet periodically to share information and
coordinate and resolve conflicts in operations.

Despite a lack of command and control over private security providers and
their employees, commanders always have authority over contractor
personnel, including private security provider personnel, when they enter
a U.S. military installation. Commanders are considered to have inherent
authority to protect the health and safety, welfare, and discipline of
their troops and installation.19 This authority allows the commander to
establish the rules and regulations in effect at each installation. For
example, an installation commander may determine traffic regulations,
weapons policies, force protection procedures, and visitor escort
policies. Contractors, including private security providers, who fail to
follow the military's rules and regulations while they are on the
installation can be prohibited from entering the installation and using
its facilities. As an example, one Army official told us that his unit had
barred some private security employees from using the unit's dining
facilities because the private security employees insisted on carrying
loaded weapons into the dining facility. The unit did not allow loaded
weapons in the dining facility for safety reasons.

18 Although DOD does not have an explicit command and control relationship
with private security providers, there are sanctions that can be imposed
in response to acts of misconduct. DOD points out in its report to
Congress that private security providers, in the absence of a formal
declaration of war by Congress, are generally not subject to prosecution
under the Uniform Code of Military Justice, but they remain subject to
prosecution by the Department of Justice under applicable U.S. federal
laws, to include the Military Extraterritorial Jurisdiction Act (18 U.S.C.
3261), the special maritime and territorial jurisdiction provisions of 18
U.S.C. 7(9), and the War Crimes Act (18 U.S.C. 2441). To date, DOD reports
that there have been no disciplinary actions brought against private
security providers for acts of criminal misconduct.

19 See Department of Defense Directive 5200.8, Security of DOD
Installations and Resources (Apr. 25, 1991).

    Coordination Between the Military and Private Security Providers in Iraq Has
    Evolved Since the Beginning of Reconstruction

Coordination between the military and the private security providers has
evolved from an informal coordination based on personal relationships to a
more structured, although voluntary, mechanism established by the Project
and Contracting Office (PCO). According to military officials,
contractors, and security providers coordination between the military and
security providers was initially done informally. When a private security
provider arrived in a unit's area of operation, the security provider
would try to meet with key officials of the unit and establish a
relationship. A private security provider we spoke with told us that the
results of this informal coordination varied based on the individual
personalities of the military and provider personnel. According to some
security providers, although many military commanders were very interested
in establishing a relationship with the security providers, others were
not. Additionally, coordination was inconsistent. For example, one officer
who had served with the 4th Infantry Division in Iraq told us that
coordination in his area was mixed. According to the officer, some
security providers, such as the one providing security for the Iraqi
currency exchange program, would always coordinate with the division
before moving through the division's area of operations but another
contractor rarely coordinated with the division. This is similar to
information we obtained from officials of the 2nd Armored Cavalry
Regiment. One officer from one of the regiment's squadrons told us that
contractors that worked within the unit's area of operation generally
coordinated with the regiment while those who were traveling in or through
his unit's area of operation generally did not coordinate with the
regiment. He also told us that on one occasion security providers escorted
the CPA administrator into their area of operation without the squadron's
knowledge and while the squadron was conducting an operation in Najaf.
According to the officer, a fire fight broke out at the CPA
administrator's location and the squadron had to send troops to rescue the
CPA administrator and his party. This had a significant impact on its
operation, according to the officer. Another officer, who served on the
Combined Joint Task Force-720 staff, told of instances when contractors
died and the division commander did not know that the contractors were
operating in his area of operations until he was instructed to recover the
bodies. Finally, according to a military officer serving with the PCO at
the time of our review, the genesis of the Reconstruction Operations
Center

20 Combined Joint Task Force-7 was a subordinate command of CENTCOM and
was responsible for the daily prosecution of the war. It was succeeded by
Multi National Force-Iraq (MNF-I) in May 2004.

(ROC) (discussed next) was the need to improve coordination between
contractors and the major subordinate commanders.

The ROC serves as the interface between the military and the contractors
in Iraq and is located within the PCO. In May 2004, the Army awarded a
contract to a private security provider to provide security for PCO
personnel and to operate the ROC, shown in figure 4. The goal of the ROC,
which became operational in October 2004, is to provide situational
awareness, develop a common operating picture for contractors and the
military, and facilitate coordination between the military and
contractors.

Figure 4: National Reconstruction Operations Center, Baghdad, Iraq

Source: Used with permission of the ROC contractor and the PCO.

The national ROC is located in Baghdad and six regional centers are
colocated with the military's major subordinate commands, to enhance
coordination between the military and the private security providers.
Figure 5 shows the locations of the regional centers.

Figure 5: Locations of the Regional Reconstruction Operations Centers in
Iraq

                                  Source: DOD.

Participation in the ROC is voluntary (although some DOD officials told us
that participation should be mandatory) and is open (at no cost) to all
U.S. government agencies, contractors, and nongovernmental organizations
operating in Iraq. The ROC and the regional centers are staffed with a
combination of military, U.S. government civilian, and contractor
personnel who provide a number of services for private security providers
and others. Among the services the ROC provides are:

o 	Intelligence information. The military provides unclassified
intelligence information to the ROC for dissemination to contractors.
Intelligence information is updated daily and information is available on
a passwordprotected Web site and through daily intelligence briefings. In
addition, contractors can request specific threat assessments on future
building sites and planned vehicle routes. Contractors use the ROC to pass
on information about incidents and threats to coalition forces as well.

o 	Military assistance. The ROC serves as the 911 for contractors who need
military assistance. Contractors who need assistance contact either the
national ROC or the regional ROCs and ROC personnel contact the closest
military unit and ask it to provide assistance. Assistance, such as a
quick reaction force or medical assistance, is provided if military assets
are available. Security providers we spoke with said that they rarely call
for a quick reaction force because incidents with insurgents are usually
over within a matter of minutes but on some occasions the quick reaction
forces have proved to be very helpful. For example, one after action
report described an incident in February 2005 in which a private security
team was ambushed by 20 insurgents and attacked by small arms fire and
three rocket-propelled grenades. The contractors contacted both the
regional ROC in Mosul and the national ROC in Baghdad. The military
responded with fixed wing assets within 15 minutes and a rotary wing quick
reaction force escorted the team safely back to Mosul. Contractors more
frequently receive medical assistance from the military and described the
assistance they received as excellent. Figure 6 depicts the process used
to request assistance through the ROC or the regional ROCs.

          Figure 6: Process for Requesting Assistance through the ROC

               Source: GAO from data provided by ROC contractor.

o 	Improved communications. Communications with the military can be
difficult in Iraq because of a lack of radio interoperability between the
military and contractors. The ROC facilitates communications between the
military and contractors. First, the ROC provides contact numbers for the
military to private security providers to use when they are moving around
in Iraq. Second, the ROC will ensure that the military is aware of
contractor movements. Security providers who so choose can provide the ROC
with information on convoy movements, which the ROC will forward to the
appropriate military commands. Third, the ROC can contact the military to
provide assistance to contractors, and finally, the ROC can track convoys
through a real-time tracking system that uses the global positioning
system and includes a communications link with the ROC if assistance is
needed.

Some Coordination While security providers, reconstruction contractors,
and military Problems Remain between representatives of the PCO believe
that the ROC has improved Private Security Providers coordination on the
complex battle space in Iraq, both the private security

providers and the military believe that several coordination issues remain

and the U.S. Military	to be resolved. Security providers and military
officials expressed continuing concern about incidents between security
providers and the military when approaching military convoys and
checkpoints and the need

Blue on White Incidents Are of Major Concern to the Military and Private
Security Providers

for a better understanding of the complex battle space by both private
security providers and the military.

One of the coordination issues that contractors and the military continued
to be concerned about is blue on white violence. Blue on white violence is
the term used by contractors and the military to describe situations when
the military fires at friendly forces (such as contractors) or, as happens
less frequently, when private security employees fire at military forces.
An analysis of incident reports completed by the ROC indicates that these
incidents happen most frequently when contractors encounter a military
checkpoint or a military convoy. Private security providers have told us
that they are fired upon by U.S. forces so frequently that incident
reports are not always filed with the ROC. According to some incident
reports filed with the ROC, some contractors believe that U.S. forces have
fired on private security provider vehicles without provocation. For
example, one security company official reported that his convoy was
traveling on a route in Iraq when a U.S. military convoy approached.
According to the report, the security convoy identified itself using
generally recognized identification procedures and pulled off the road to
allow the military convoy to pass. After about half of the 20-vehicle
convoy had passed, a gunner in the military convoy began firing at the
security convoy. According to the after incident report filed with the
ROC, no injuries or damage resulted from this incident. A similar incident
happened on the road from the International Zone to the Baghdad airport.
As in the previous incident, part of a U.S. military convoy passed the
private security convoy without incident when a gunner in the fourth
vehicle of the convoy began to fire at the lead vehicle in the private
security convoy. After this incident, the private security team leader
received an apology from the servicemember who had fired on the security
company vehicle. As a result of this incident, the company's vehicle was
rendered unserviceable.

In another incident report, a private security provider documented an
incident at a U.S. military checkpoint. According to the report, a
security convoy had slowed to approach the checkpoint, and was then fired
on by a U.S. soldier. The report went on to say that no verbal or hand
warnings were given and no reason was given for the shooting. According to
representatives of the security providers and the former director of
security for the PCO, many of these incidents happen because of the
military's concerns over insurgents using vehicle-borne improvised
explosive devices, as well as the inexperience of some U.S. troops.

Reducing the number of blue on white incidents is a high priority for the
U.S. military, the PCO, private security providers, and the Private
Security Company Association of Iraq, a Baghdad--based association that
works with both the U.S. government and the Iraqi government to resolve
issues related to private security providers. In late December 2004, in an
effort to reduce the number of blue on white incidents, the Multi National
Corps-Iraq (MNC-I) issued an order to major subordinate commands in Iraq
establishing procedures for private security providers to use when
approaching military convoys and military checkpoints. MNC-I directed the
subordinate commanders to implement the procedures detailed in the order
and to educate all private security providers and military on the
procedures. Among the procedures were (1) a prohibition on nontactical
vehicles (such as the vehicles used by private security providers) passing
moving military convoys; (2) a requirement that warning shots, when fired,
be aimed away from a vehicle and demonstrate a clear intention to do harm
if directions are not obeyed; and (3) a requirement that vehicles should
maintain a distance of a least 200 meters from a military convoy.

In early 2005, MNC-I completed an analysis of friendly-fire incidents that
occurred between November 1, 2004 and January 25, 2005 to determine the
top 10 lessons learned from such incidents. Among the top 10 lessons was
the need for U.S. forces to comply with the rules of engagement, which
require that U.S. troops determine that a person's intent is hostile
before the military uses deadly force. The other lessons learned were
similar to the procedures included in the order. According to a PCO
official, the top 10 list was provided to the private security providers.

Despite the MNC-I order, blue on white incidents continue to occur and
security providers remain concerned about the frequency of the attacks. In
the 5 months (January to May 2005) since the order was issued, the ROC has
received reports on 20 blue on white incidents and the number of actual
incidents is likely to be higher since, as we noted previously, some
providers no longer report these types of incidents. Data on the number of
incidents for the 5 months before the order was issued was not available
because the ROC did not start collecting information on blue on white
incidents until November 2004. A ROC official noted that blue on white
incidents had decreased in April 2005. He believed that the reduction was
due, in part, to the adoption of the procedures outlined in the order.
However, he also noted that the number of incidents could increase again
as troops rotate in and out of Iraq or if terrorist attacks increase.

Units Do Not Receive Specific Training or Guidance about Working with
Private Security Providers before Deploying

Military units that deployed to Iraq received no guidance or training
regarding the relationship between private security providers and the
military prior to deploying. Representatives from the 2nd Armored Cavalry
Regiment, the 82nd Airborne Division, and the 1st Marine Expeditionary
Force all told us that they received no guidance from either CENTCOM or
Combined Joint Task Force-7 and that their units had not developed any
written procedures for dealing with private security providers.
Furthermore, a representative of a unit that is preparing to deploy, the
101st Airborne Division, told us that it had not received any guidance on
how to work with private security providers nor had it been directed to
include information on private security providers, the PCO, or the ROC in
its predeployment training, even though the 101st will be co-located with
a regional ROC. To highlight the lack of training and guidance,
representatives from one unit told us that they did not know there were
private security providers in their battle space until the providers began
calling for assistance. They also noted that any information about who
would be in the battle space and the support the military should be
providing would be useful.

Several private security providers we spoke with told us that they
believed it would be helpful if U.S. forces who deployed to Iraq received
information on private security providers in Iraq. For example, the
providers believed that U.S. troops needed more information on why private
security providers are in Iraq, the impact of having private security
providers there, and the operational styles of the private security
providers. Army officials we spoke with believed that this type of
information would be helpful and suggested that private security providers
could use additional information about working with the U.S. military as
well.

  Agencies Have Limited Capabilities to Assess the Cost Impact of Using Private
  Security Providers

Despite the significant role played by private security providers in
enabling reconstruction efforts to proceed, neither the Department of
State, DOD, nor USAID has complete data on the cost associated with using
private security providers. For example, the quarterly report submitted by
the Department of State to Congress on the status of reconstruction
projects and funding does not provide information on security costs that
are incurred under reconstruction contracts. Even at the contract level,
the agencies generally had varying degrees of information on the costs
associated with private security providers. On 15 reconstruction contracts
we found that the cost to obtain private security providers and
securityrelated equipment at the reconstruction contract level can be
considerable, as it accounted for 15 percent or more on 8 of the 15
contracts we

reviewed; on only 4 of those 8 contracts, however, did the agencies
formally track security costs under a separate task order or contract line
item. Agency and contractor officials acknowledged that security costs had
diverted planned reconstruction resources and led to canceling or reducing
the scope of certain reconstruction projects, though they also noted that
other factors have affected reconstruction projects.

    Agencies Do Not Comprehensively Track Costs Associated with Private Security
    Providers

The Secretary of State is responsible for submitting a quarterly report to
Congress that outlines the current status of programs, initiatives, and
funds dedicated to the Iraq reconstruction efforts.21 These quarterly
reports provide information at the project and sector level-such as oil or
electricity-and acknowledge the challenges and costs associated with the
security environment in Iraq. For example, in its April 2005 report, the
State Department noted that nearly $1.3 billion in funding has been, or
will be, used in part to (1) cover unanticipated post-battle
reconstruction costs, (2) cover indirect cost increases of contractors
operating on cost-plus contracts that allow them to continue billing even
during delays, and (3) account for increased security costs. The reports,
however, do not identify the magnitude or impact of the costs associated
with security providers on reconstruction efforts or available funding.
Discussions with DOD and USAID personnel found that the financial and
management information systems used to help prepare the report are not
able to track costs incurred by reconstruction contractors for security
services. Agency officials noted that to obtain such information would
currently require the agencies to request such information from the
contractors and manually prepare the information. Agency officials noted
they have made inquiries on an ad hoc basis in the past, but cautioned
that such requests can be burdensome for both the contractors and agency
officials.

Contractor officials acknowledge that the cost of private security
services and security-related equipment, such as armored vehicles, has
exceeded what they originally envisioned. In some cases, increased
security costs resulted in reducing or canceling the scope of some
reconstruction projects. For example:

21 Emergency Supplemental Appropriations Act for Defense and for the
Reconstruction of Iraq and Afghanistan for FY 2004, Pub. L. No. 108-106,
section 2207 (Nov. 6, 2004) as amended by Pub. L. No. 108-309, section 135
(Sep. 30, 2004).

o 	Contractor officials noted they were originally tasked to rehabilitate
23 electrical substations and had conducted site surveys and procured
equipment for all 23 substations. According to contractor officials,
however, the U.S. Army Corps of Engineers concluded that securing 14 of
the substations would not be cost effective, and therefore reduced the
scope to 9 substations. Contractor officials indicated that the equipment
and materials procured for the 14 substations have been or will be turned
over to the Iraqi Ministry of Electricity.

o 	In February 2004, USAID obligated an additional $33 million on one of
its contracts to pay for unanticipated increases in security costs that
left it short of funds to pay for construction oversight and quality
assurance, as well as fund administrative costs.

o 	In March 2005, USAID cancelled two electrical power generation-related
task orders totaling nearly $15 million to help pay for increased security
costs being incurred at another power generation project in southern
Baghdad.

Contractor officials noted, however, that other factors also affected
reconstruction progress, such as changes in priorities or higher material
costs. For example, officials at one contractor noted that security had
not been a significant factor delaying their work; rather, they pointed to
delays in reviewing and approving projects and slower than anticipated
release of funding. Similarly, USAID officials noted that, among other
materials, the cost of concrete is significantly higher than anticipated,
driving up the cost of many reconstruction projects.

We found that at the contract level, agency personnel did not have
consistent insight into security costs and their impact on reconstruction
efforts. For example, agencies often did not require prospective bidders
to propose meaningful security costs as part of their contract cost
proposal nor require contractors to prepare a baseline security cost
estimate at the time of contract award. Many of the contracts, including
those awarded after the security environment began to deteriorate, were
indefinite delivery contracts, in which the work to be accomplished was
often described in general terms, with the specific work to be
accomplished determined as task orders are issued. In several cases,
agency personnel provided prospective contractors a sample task order to
use in preparing their proposals. While the contractors' cost and
technical proposals described how they would approach security issues and
provided an associated cost estimate, such estimates were only for
evaluation purposes

and did not reflect meaningful security costs. Overall, in only 3 of the
16 contracts we reviewed did contractors prepare an initial security cost
estimate for the entire contract.

Further, we found that in only 7 of the 16 contracts did the contractors
regularly provide security-related cost information in either monthly
progress reports or in separate contract line items or task orders. The
level of information and insight provided varied greatly depending on the
approach taken. For example, on three contracts, the contractor provided
security cost-related information for each of its projects, but did not
provide information at the total contract level. In one contract, security
costs were reported on both the task order and contract level. In one
contract, the security cost information was reported under a separate
contract line item with other expenses, and visibility was more limited.
In the remaining two contracts, the agency established separate task
orders specifically to track security-related expenses at the contract
level.

In 15 of the 16 reconstruction contracts that we reviewed, we were able to
obtain data on the costs of acquiring private security services and
related security equipment22 by reviewing invoices that private security
providers and security equipment providers submitted to contractors. Our
analysis of this data found that at the reconstruction contract level
there was considerable variation in estimated security costs as a
percentage of total contract billings (see figure 7).23 Eight of the 15
contracts had security costs that exceeded 15 percent of total contract
billings as of December 31, 2004; on 4 contracts, the percentage of
contract billings accounted for by the cost of security subcontractors was
more than 25 percent.24 On only 2 of those 8 contracts in which security
costs exceeded 15 percent did agency personnel require the contractors to
formally track and report security costs under a separate task order or
contract line item. Though

22 One contractor did not specifically track or report the security costs
it incurred under the contract.

23 Overall, the costs to obtain private security services and related
security equipment for the 15 reconstruction contracts that we were able
to obtain and review were about $334 million, or about 7 percent of total
contract billings as of December 31, 2004.

24 Several contractor officials noted the cost of security relative to
total contract costs can vary over time. For example, they noted that
initial security costs, such as for mobilizing and equipping security
personnel and purchasing armored vehicles, can be considerable in relation
to the amount of reconstruction work authorized. As additional work is
authorized, the relative percentage accounted for by security costs could
decrease considerably.

not required, one contractor reported incurred security costs on two
contracts on its own initiative.

Figure 7: Percentage of Total Contract Billings Accounted for by Security
Subcontractor Expenses as of December 31, 2004

Number of contracts

5

4

3

2

1

0 <5 5<10 10<15 15<20 20<25 >25

In percent

Source: GAO analysis of contractor supplied information.

While our analysis indicates that at the reconstruction contract level the
cost of obtaining private security services can account for a significant
percentage of the contract's total cost, it does not reflect total private
security costs. For example, reconstruction contractors did not always
specifically track security-related costs incurred by their subcontractors
or lower tier suppliers. According to contractor officials, in seven of
the sixteen reconstruction contracts that we reviewed, at least one of
their subcontractors provided for their own private security; in five of
those seven contracts, all of the subcontractors were required to provide
for their own security.25 The cost for a subcontractor to obtain private
security

25 In three other contracts, the contractors indicated that they provided
security for their subcontractors; one contractor did not hire
subcontractors; and in the five remaining contracts, the contractor did
not know about or did not provide information on subcontractor security
needs.

services can be considerable. For example, in one case, the costs incurred
by a major subcontractor amounted to almost $10 million, or nearly
onethird of what the reconstruction contractor was paying for security. In
another case, the costs incurred by a major subcontractor exceeded $3.5
million, or about 8 percent of what the reconstruction contractor was
paying for security.

Our analysis and discussions with agency and contractor officials
identified several factors that influenced security costs, including (1)
the nature and location of the work; (2) the type of security required and
the security approach taken; and (3) the degree to which the military
provided the contractor security services. For example, projects that took
place in a fixed, static location were generally less expensive to secure
than a project that extended over a large geographic location, such as
electrical transmission lines. In other cases, contractors relied on
former military personnel or other highly-trained professionals to provide
security to their employees. Conversely, some contractors made more
extensive use of local Iraqi labor and employed less costly Iraqi security
guards. Lastly, some contractors were able to make use of security
provided by the U.S. military or coalition forces. For example, several
contractors had facilities within or near U.S.-controlled locations, such
as Baghdad's International Zone or on military bases, which reduced their
need to obtain private security services. In another case, the contractor
was provided a limited degree of protection by the U.S. Army.

Agency and contractor officials had mixed opinions on the value of
establishing separate reporting or tracking mechanisms. For example, some
agency officials believed that having visibility into security-related
costs enabled them to provide more effective contract oversight, and
identify security cost trends and their impact on the project. Other
officials noted that many factors affect the cost and progress of
reconstruction efforts, including changes in planned funding or projects,
material costs, and the inability to find qualified workers willing to
work in Iraq. Consequently, they indicated that they generally try to
manage the projects at a total project level, rather than by individual
elements, such as security. For example, they noted that when reviewing
project status reports with the contractors, they will question the
contractors on the factors causing delays or cost increases. They were not
certain that having specific insight into security costs would help them
better manage or oversee their projects. Agency program and financial
management officials noted that from a budgeting perspective, tracking
security cost information could enable staff to provide better estimates
of future funding requirements.

Contractor officials generally indicated that establishing a separate task
order or contract line item for security enabled them to more efficiently
account for and bill security costs and to more accurately report
reconstruction progress. For example, officials at one contractor noted
that they often had several projects under way which required security.
Prior to establishing a separate task order, the security provider would
be required to allocate costs to each of the projects even though the
security was provided for a given location, often resulting in lengthy and
complex vouchers, higher potential for error, and increased administrative
expenses. Once a separate task order was established, its security
provider charged the costs incurred for providing security to the
location, rather than each project, simplifying the billing and review
process. Other contractor officials noted that the need to obtain security
providers and security-related equipment often occurred during the early
stages of the contract when the agencies had issued only a few task orders
for specific reconstruction projects. Consequently, contractor officials
told us they found themselves incurring considerable security-related
expenses during the mobilization phase that had to be allocated to
subsequent task orders, thereby increasing costs. These officials noted
that allocating security costs to existing task orders would have resulted
in the task's cost exceeding the government's estimate. Contractor
officials indicated that a separate task order for security would have
enabled them to better explain to agency personnel the cost of the
reconstruction effort and the impact of security costs and enable them to
account for and bill security costs more efficiently.

Data from the Defense Manpower Data Center (DMDC) 26 show that in fiscal
year 2004, the attrition rates for the occupational specialties preferred
by private security providers returned to the same or slightly lower
levels than those seen prior to the institution of occupational stop

26 DMDC collects and maintains an archive of DOD's automated manpower,
training, and financial databases.

  Expanded Use of Private Security Providers Does Not Appear to Be Increasing
  Attrition among Military Personnel

losses27 in September 2001 despite the increased use of private security
providers. Private security providers working in Iraq are hiring former
servicemembers with a variety of skills, including servicemembers with
military police or Special Operations experience. Military officials told
us that they believe that servicemembers with these skills are separating
from the military earlier than in prior years. We are unable to determine
from this data whether servicemembers are leaving the military for
positions with private security providers as the data can only demonstrate
trends in attrition, not explain why people are leaving the military or
what they intend to do after leaving the military.

Private security providers prefer to hire former military members,
particularly Special Operations forces, for their unique skills and
experience. Servicemembers with Special Operations background are often
hired to fill key positions, such as security advisors and project
managers, and to provide personal security to high ranking government
officials. These positions may pay as much as $33,000 a month. Other
servicemembers may be hired to provide security to civilians in vehicle
convoys with salaries between $12,000 and $13,000 per month, while some
may be hired to provide site security for buildings and construction
projects at somewhat lower salaries. For the most part, employees only
receive these salaries when they are working in Iraq, typically 2 to 3
months at a time. All of the U.S.-based private security providers we
spoke with told us that they do not actively recruit current
servicemembers; however, they do recruit at military-sponsored transition
job fairs, through the Internet, and with advertisements in military
magazines and newspapers.

    Officials from the Special Operations Command and Army Military
    PoliceBelieve Attrition Is Increasing Due, in Part, to Security-Related Job
    Opportunities

Both Special Forces and military police personnel officials believe that
attrition is increasing in their military specialties. For example, during
a July 2004 hearing before the House Armed Services Committee,
Subcommittee on Terrorism, Unconventional Threats and Capabilities,
representatives from the U.S. Special Operations Command and the military
services' Special Operations commands noted that the number of Special
Forces enlisted personnel retiring at 20 years (the first time they are
eligible) has been increasing due, in part, to the increased opportunities
available in civilian government and with contractors. In addition,
representatives of the Naval Special Operations Command and the Air

27 Stop losses are short-term measures that increase force availability by
retaining active or reserve component members on active duty beyond the
end of their obligated service.

Force Special Operations Command also noted that they were seeing
increased attrition rates among those servicemembers with 8 to 12 years of
service. According to these representatives, servicemembers leaving at
this point in their careers are also leaving for opportunities with
contractors.

Army officials have also expressed concerns about attrition in the
military police force. For example, officials from the military police
personnel office at the Army's Human Resources Command told us that they
have seen a significant number of senior noncommissioned officers leave
the military police for positions with private security providers. These
officials also told us they have seen the average length of service for
colonels in the military police branch decrease from 28 to 25 years.
Furthermore, in an email provided by the Army's Human Resources Command, a
senior noncommissioned officer at the 16th Military Police Brigade noted
that the brigade did not meet its reenlistment targets in fiscal year
2004. Finally, the Army Central Command's Provost Marshall in July 2004
told us that he had lost four of his eight senior noncommissioned officers
to higher paying private security providers within the last year and was
expecting to lose two more senior noncommissioned officers. He also noted
that he had lost more than half of his company grade officers as well.

Efforts are being taken by both the military police and Special Forces
communities to address retention concerns. For example, the Army plans to
double the size of its military police force from 15,500 to 30,000 by 2006
and the Special Operations Command plans to increase its force size from
13,200 to 15,900 over the next 5 to 6 years. Increasing the size of the
Army military police and Special Operations will decrease the high
operational tempo28 and relieve some of the stress on military personnel,
which these communities believe contributed to higher attrition. In
addition, DOD recently began to offer reenlistment bonuses to Special
Operations personnel with 19 or more years of experience which range from
$8,000 to those who reenlist for one year to as much as $150,000 for those
who reenlist for an additional 6 years.

28 In this report, operational tempo refers to the total days military
personnel spend participating in normal drills, training, and exercises,
as well as domestic and overseas operational missions.

Attrition Rates for 2004 While data from several sources indicate
increased attrition in fiscal year Returned to Level Seen 2004 compared to
fiscal years 2002 and 2003 in the military skills sought by Prior to Stop
Loss Issuance private security providers, these data also showed that
attrition rates in

fiscal year 2004 had returned to the levels seen in fiscal years 2000 and
2001, prior to the majority of the stop loss policies that have been
instituted by the services at various times since September 2001. Table 1
shows the dates of occupational stop losses for each of the services.

Table 1: Occupational Stop Loss Dates for the Military Services

                            Service   Stop Loss Began         Stop Loss Ended 
                               Army    December 2001           November 2003a 
                               Navy    September 2001        August 2002      
                          Air Force    September 2001         June 2003       
                       Marine Corps     January 2002           May 2003       

Source: GAO from DOD data.

aAlthough the Army terminated its occupational stop loss program, at the
time we issued this report the Army had a unit stop loss program in
effect. The Army's unit stop loss policy applies to soldiers in units
preparing to deploy. It applies to all soldiers in a unit and prevents
soldiers from leaving the Army within 90 days of their unit's deployment,
during the unit's deployment, and 90 days after the unit has returned from
its deployment.

Each of the services added and released occupations from stop loss as the
needs of the service dictated. For example, the Air Force placed all
occupational specialties under a stop loss in September 2001 and then
released a number of occupations from the stop loss in January and June
2002. As we noted, the Air Force ended all stop loss activities in June
2003. In the Army, Special Operations forces were placed under stop loss
in December 2001 and were released from the stop loss in June 2003, while
enlisted servicemembers who served as military police were placed under
stop loss in February 2002 and were released from the stop loss in July
2003. Army officers serving as military police were placed under the stop
loss in February 2002 and were released from the stop loss in June 2003.

Data obtained from DMDC on the military occupational specialties preferred
by private security providers revealed that several of these specialties
show increased attrition in fiscal year 2004 over the attrition rates in
fiscal year 2003. These specialties include:

o  Air Force: Officer military police

o  Army: Enlisted and Officer Infantry, military police, and Special
Forces

o  Marine Corps: Enlisted and Officer Infantry and military police

o 	Navy: Enlisted military police, Officer Special Forces, and Enlisted
SEALs.

For the specialties listed, the average attrition rates for each fiscal
year are shown in figure 8. As seen in figure 8, the attrition rates for
these specialties decreased in fiscal year 2002 and 2003 from their 2000
and 2001 levels and showed an increase in attrition in fiscal year 2004.
These data also show that the levels of attrition seen in fiscal year 2004
were actually lower than those seen in fiscal years 2000 and 2001.

Figure 8: Average Attrition Rates for Military Occupational Specialties
Preferred by Private Security Providers which Experienced Increased
Attrition in Fiscal Year 2004

Average attrition rate (by percent)

25

20

15

10

5

0 2000 2001 2002 2003 2004

Fiscal year

Enlisted Officer

                       Source: GAO analysis of DOD data.

The decrease in attrition rates seen in fiscal years 2002 and 2003 as
compared to the rates seen in fiscal years 2000 and 2001 reflect attrition
patterns that are seen during stop losses. Service officials told us that
stop loss policies affect attrition rates; they can temporarily delay
separations and artificially decrease attrition rates for the year of the
stop loss. Officials at the Army Human Resources Command also found that
stop loss policies can also increase attrition rates for the year
preceding the stop loss. For example, the Army saw increased separations
in 2002 for military police colonels in anticipation of their
occupation-specific stop loss. Given the impact of stop loss policies on
attrition, data may not accurately convey the typical personnel losses
that would have occurred had the stop loss not been in effect as people
left the military both in anticipation of stop loss and after stop loss
was lifted. Thus, we are unable to determine whether the increase in
attrition rates in fiscal year 2004 was due to the lifting of the stop
loss policy or true increases in military attrition.

Figure 9 shows a pattern of decline in attrition rates during the stop
loss period followed by a rebound for Army Special Forces in fiscal year
2004. Attrition rates for enlisted Army Special Forces were almost
identical in fiscal years 2000 and 2001, and declined through 2003 during
the Army Special Forces specific stop loss, which was in effect from
December 2001 to June 2003. However, after the stop loss was lifted,
attrition rates for the enlisted Army Special Forces almost doubled from
6.5 percent in fiscal year 2003 to 12.9 percent in fiscal year 2004, a
level which was about 25 percent higher than the fiscal year 2000 rate.
Attrition rates for Army Special Forces officers also declined during the
stop loss period and returned to just below the fiscal years 2000 and 2001
levels in fiscal year 2004.

Figure 9: Army Special Forces Attrition Rates

Percent attrition rate 14

12

10

8

6

4

2

0 2000 2001 2002 2003 2004 Fiscal year

Army Special Forces enlisted attrition Army Special Forces officer
attrition Source: GAO analysis of DOD data.

The Special Operations Command also provided us with continuation rates
calculated by DMDC for the Army, Navy, and Air Force Special Operations
Commands. Continuation rates were calculated by determining which
personnel remained on active duty from one year to the next and are an
alternative method used to demonstrate retention and attrition. The
continuation rates showed an increase in losses in 2004 for the Army
Special Operations and Navy Special Warfare Commands senior
noncommissioned officers, as well as Army Special Operations warrant
officers. Similar to the DMDC data provided to us, these commands also saw
a decrease in losses (or a decrease in attrition rates) in 2002 after a
stop loss was issued and, with the exception of the Navy Special Warfare
warrant officers, an increase in losses (or an increase in attrition
rates) after the stop loss was lifted.

Additionally, as shown in figure 10, the continuation data for Army
Enlisted Special Operations personnel with 14 through 19 years of service
separated at only a slightly higher rate in 2004 than in the pre-stop loss
years - fiscal years 2000 and 2001. In the July 2004 hearing before the
House Armed

Services Committee, Subcommittee on Terrorism, Unconventional Threats and
Capabilities, the Senior Enlisted Advisor for the United States Special
Operations Command stated that the loss of these mature, operationally
experienced personnel creates critical operational risk for the Special
Forces. According to the Special Operations Command officials with whom we
spoke, because the command is losing some of its most experienced
personnel, younger less experienced servicemembers are being promoted to
leadership positions more quickly than in the past. This need to rely on
less experienced personnel has created some concerns for the command.

Figure 10: Continuation Rates for Army Enlisted Special Operations
Personnel with 14 through 19 Years of Service for Fiscal Years 2000
through 2004

             Total Personnel Continuation rate in percent 2,000 100

                                  80 1,500 60

                                       40

                                20 0 1,000 500 0

2000 2001 2002 2003 2004

                             Loss 116 104 43 31 116

                      Con't 1,225 1,229 1,257 1,245 1,121

                         Con't 91.4 92.2 96.7 97.6 90.6

Source: Special Operations Command.

Note: Con't = continuation.

    Many Factors Influence the Decision to Separate from the Military

While available data indicate that attrition, in almost all of the
military specialties favored by private security providers, has returned
to pre-September 11, 2001 levels, the data do not indicate why personnel
are leaving the military and what they are doing after they leave. Exit
surveys conducted with servicemembers leaving the military do not include
questions on the servicemembers' future employment plans. Officials at the
Army Human Resources Command told us that after September 11, 2001, the
opportunities for employment in the security field became more widespread
as government agencies as well as private companies and organizations
recognized the need to improve their security. These officials as well as
officials from the Special Operations Command noted that they are losing
personnel not only to private security firms operating in Iraq but also to
security management companies operating in the United States, and security
operations in other government agencies. Service officials at these
commands also attributed the attrition rates to other factors, such as the
attraction of a strong civilian economy, high operational tempo, and
concerns about various quality of life conditions.

Conclusions	The reconstruction effort in Iraq is complex, costly, and
challenging, in part, due to an urgent need to begin and execute
reconstruction projects in an uncertain security environment. The
extensive use of private security providers has raised a number of issues,
particularly regarding how to facilitate methods contractors use to obtain
capable providers. And, once security providers are actively working in an
area, they must determine how best to establish effective coordination
mechanisms with nearby military forces. While the experience in Iraq was
certainly unique relative to historical reconstruction and assistance
efforts, it is far less certain whether or not the future will find the
United States engaged in reconstruction and assistance efforts in other
hostile environments with costs that are likely to be significant. Much
has been learned in Iraq over the past two years on this subject that can
serve the United States and its contractors well in planning for and
executing future reconstruction or assistance efforts.

Recommendations for We are making four recommendations to address a number
of immediate Executive Action and long term issues:

o 	To assist contractors operating in hostile environments in obtaining
security services required to ensure successful contract execution, we

recommend that the Secretary of State, the Secretary of Defense, and the
Administrator, U.S. Agency for International Development, explore options
that would enable contractors to obtain such services quickly and
efficiently. Such options may include, for example, identifying minimum
standards for private security personnel qualifications, training
requirements and other key performance characteristics that private
security personnel should possess; establishing qualified vendor lists;
and/or establishing contracting vehicles which contractors could be
authorized to use.

o 	To ensure that MNF-I has a clear understanding of the reasons for blue
on white violence, we recommend that the Secretary of Defense direct the
Combatant Commander, U.S. Central Command, to direct the Commander, MNF-I,
to further assess all of the blue on white incidents to determine if the
procedures outlined in the December 2004 order are sufficient.
Furthermore, if the procedures have not proven to be effective, we
recommend that the Commander, MNF-I, develop additional procedures to
protect both U.S. military forces and private security providers.

o 	To ensure that commanders deploying to Iraq have a clear understanding
of the role of private security providers in Iraq and the support the
military provides to them, we recommend that the Secretary of Defense
develop a training package for units deploying to Iraq which provides
information on the Reconstruction Operations Center, typical private
security provider operating procedures, any guidance or procedures
developed by MNF-I or MNC-I applicable to private security providers (such
as procedures outlined in the December 2004 order to reduce blue on white
incidents), and DOD support to private security provider employees. The
training package should be re-evaluated periodically and updated as
necessary to reflect the dynamic nature of the situation in Iraq.

o 	To improve agencies' ability to assess the impact of and manage
security costs in future reconstruction efforts, we recommend that the
Secretary of State, the Secretary of Defense, and the Administrator, U.S.
Agency for International Development, establish a means to track and
account for security costs to develop more accurate budget estimates.

  Agency Comments and Our Evaluation

DOD, the Department of State and USAID provided written comments on a
draft of this report. Their comments are discussed below and are reprinted
in appendixes II, III, and IV, respectively.

DOD concurred with each of our recommendations, noting that it welcomed
our assistance in improving how DOD and its contractors can plan for and
effectively execute contracts in a complex and changeable security
environment. Moreover, DOD described the steps it would take to implement
some of our recommendations.

The Department of State disagreed with our recommendation to explore
options to assist contractors in obtaining private security services,
citing concerns that the government could be held liable for performance
failures. For example, while the Department noted that it could provide
the criteria it utilizes to select its contractors on a non-mandatory
basis, it expressed concern that contractors relying on government minimum
standards could assert that performance failures were the result of the
government establishing poor standards. The Department also noted it was
unclear that a government-managed security contractor program would result
in enhanced contractor security, compared to a contractor-managed security
program. While our work found that contractors had difficulty in obtaining
security providers that met their needs and that they would have benefited
from the agencies' assistance, we did not recommend a particular course of
action nor recommend a government-managed security program. Rather, we
recommended that the Department, working jointly with DOD and USAID,
explore options to assist contractors that are unfamiliar with obtaining
the type of security services needed in Iraq. Such an effort would
necessarily entail a thorough assessment of the advantages, disadvantages
and risk mitigation strategies of the potential options. Given the
significance of contractors in accomplishing reconstruction objectives and
the mixed results that they encountered when selecting their security
providers, we continue to believe that thoroughly exploring potential
options would be prudent.

The Department of State did not indicate whether it agreed with our
recommendation to establish a means to track and account for security
costs in order to develop more accurate budget estimates. It noted that it
can capture costs associated with direct security providers and work with
prime reconstruction contractors to determine the feasibility of providing
subcontract security costs. It is not clear to us from the Department's
comments how it intends to work with DOD and USAID to establish a

uniform means to track and account for private security costs, which is
essential given that DOD and USAID are the principal agencies responsible
for awarding and managing the majority of reconstruction contracts.

In written comments on a draft of this report, USAID found the report
factually correct, but did not comment on the recommendations.

We are sending copies of this report to the Chairman and Ranking Minority
Member, House Committee on Government Reform; the Chairman and Ranking
Minority Member, House Committee on Energy and Commerce; the Chairman and
Ranking Minority Member, Senate Committee on Governmental Affairs; and
other interested congressional committees. We are also sending a copy to
the Secretary of Defense; the Secretary of State; the Administrator, U.S.
Agency for International Development; and the Director, Office of
Management and Budget, and will make copies available to others upon
request. In addition, the report will be available at no charge on the GAO
Web site at http://www.gao.gov.

If you or your staff have any questions, please contact Bill Solis at
202-512
8365 or by e-mail at [email protected]. Contact points for our Offices of
Congressional Relations and Public Affairs are found on the last page of
this report. GAO staff who made major contributions to this report are
included in appendix V.

William Solis
Director,
Defense Capabilities and Management

David Cooper
Director,
Acquisition and Sourcing Management

List of Congressional Committees

The Honorable Richard G. Lugar
Chairman
Joseph R. Biden, Jr.
Ranking Minority Member
Committee on Foreign Relations
United States Senate

The Honorable John Warner
Chairman
The Honorable Carl Levin
Ranking Minority Member
Committee on Armed Services
United States Senate

The Honorable Henry Hyde
Chairman
The Honorable Tom Lantos
Ranking Minority Member
Committee on International Relations
House of Representatives

The Honorable Duncan L. Hunter
Chairman
The Honorable Ike Skelton
Ranking Minority Member
Committee on Armed Services
House of Representatives

Appendix I

Scope and Methodology

To determine the extent to which U.S. government agencies and contractors
working in Iraq at the behest of the U.S. government have acquired
security services from private security providers, we reviewed a wide
array of documents to determine who was responsible for providing security
to those types of organizations, including

o 	warning orders and fragmentary orders issued by the U.S. Central
Command (CENTCOM), Combined Joint Task Force-7, Multi National
Forces-Iraq, and Multi National Corps-Iraq to determine if any orders had
been issued regarding providing security to U.S. government employees or
contractors rebuilding Iraq;

o 	contracting documents such as statements of work, requests for
proposals and contracts and contact modifications;

o 	Department of Defense (DOD) regulations and instructions that relate to
the management of contractors during contingency operations;

o 	Departments of State and Defense memoranda of understanding regarding
security and support;

o 	proposed guidance between the Department of State and the Department of
Defense regarding contractor support;

o 	guidance to contractors prepared by the Coalition Provisional Authority
(CPA) regarding contractor operations in Iraq; and

o 	Department of State rules and regulations, including the Foreign
Affairs Manual.

We also met with officials from CENTCOM to obtain the command's position
on the extent of the military's responsibility to provide security to
civilian government employees and contractors, including both contractors
supporting military forces and those engaged in rebuilding Iraq. In
addition, we met with or obtained information from Army and Marine Corps
units that served in Iraq to discuss their understanding of the military's
responsibility to provide security to contractors and civilian government
employees and interviewed representatives of the State Department's Office
of Diplomatic Security to discuss the State Department's use of private
security providers in Iraq as well as representatives of other government
agencies working in Iraq who have

Appendix I Scope and Methodology

contracted with private security providers to provide security to
employees and facilities.

To determine how agencies addressed security needs when planning for and
awarding Iraq reconstruction contracts, we interviewed officials at the
CPA; DOD, including the U.S. Army Corps of Engineers and the Project and
Contracting Office (PCO); the Department of State; and the U.S. Agency for
International Development (USAID). We discussed the guidance and direction
they received prior to awarding contracts and how such information was
provided to the contractors. We reviewed various acquisition documents,
including agency acquisition plans, requests for proposals, price
negotiation memoranda, correspondence between contractors, and other
relevant documents. We met with agency and contractor officials to discuss
the nature and type of guidance provided relative to the expected security
environment, the need for obtaining security services, and requirements
and standards for security personnel or security-related equipment.

We identified how security-related requirements were reflected in
reconstruction contracts by selecting 16 contracts that were awarded to 10
reconstruction contractors. We selected these contracts using a
nonprobabilistic methodology that considered such factors as the awarding
agency; the year awarded; the contract's expected dollar value; and the
type, nature and location of the reconstruction activity. Nine of these
contracts were awarded in 2003 and 7 were awarded in 2004. For each of
these contracts, we obtained the contract and contract modifications
issued as of December 31, 2004, totaling about $8.6 billion; relevant
sections of the contractor's cost and technical proposal; security plans;
security-related subcontracts; and other pertinent documents. We also
obtained and reviewed 6 contracts that had been awarded by the U.S. Army
Corps of Engineers, the Department of State, USAID and by an Army
contracting agency for the CPA, for the protection of their personnel and
facilities in Iraq to compare the type of security-related requirements
incorporated within U.S. government contracts with those incorporated into
contracts awarded to reconstruction contractors and, in turn, to
subcontracts with security providers.

We identified whether there are existing government or international
standards relative to security providers that were applicable to the Iraqi
security environment. We also spoke with agency security personnel,
including the Department of State's Office of Diplomatic Security and the
Overseas Security Advisory Council. We also contacted representatives

Appendix I Scope and Methodology

from relevant industry associations, including the International Peace
Operations Association, International Security Management Association, and
the American Society for Industrial Security. We also researched European
security-provider standards and conducted a literature review of articles
relating to the security provider industry.

To assess the military's relationship with private security providers, we
met with or spoke to representatives of CENTCOM, Army Central Command, and
the PCO (at the Pentagon and in Baghdad) to discuss issues related to the
military's authority over private security providers and reviewed a
Department of Defense report to Congress addresses the use of private
security providers in Iraq. We also met with or contacted representatives
of Army and Marine Corps units that had been stationed in Iraq to
determine if they had been provided guidance on working with private
security providers and discussed issues related to command and control of
private security providers.

To assess the level of cooperation and coordination between the military
and private security providers both before and after the advent of the
Reconstruction Operations Center (ROC), we spoke with 9 private security
providers working in Iraq as well as representatives of military units
which had served in Iraq to determine the state of coordination prior to
and after the ROC became operational. We spoke with representatives of the
PCO to discuss the ROC's role in coordinating the interactions between the
military and private security providers and any actions the PCO was taking
to improve coordination between private security providers and U.S.
military forces. We also discussed coordination issues with the executive
director of the Private Security Company Association of Iraq and several
reconstruction contractors. We also reviewed information posted on the ROC
Web site related to security and reviewed documents developed by the ROC
to explain its operations and functions.

To determine the extent to which government agencies assessed the costs
associated with using private security providers and security-related
costs, we reviewed various contractual documents, including the 16
reconstruction contracts and subsequent modifications, consent to
subcontract requests, and monthly cost and progress reports submitted by
the contractors we reviewed. We also met with agency and contractor
officials to determine the means by which they maintained visibility over
security providers and security-related expenses, as well as their general
experiences in Iraq, the impact of security on reconstruction efforts, and
the process by which they obtained security providers.

Appendix I Scope and Methodology

We collected data on the costs associated with acquiring and using private
security providers or in-house security teams; and the cost associated
with acquiring security-related equipment, such as armored vehicles, body
armor, communication equipment, and other security-related costs. We did
not attempt to quantify the impact of the security environment on
increased transportation or administrative expenses, on the pace of
reconstruction efforts caused by security-related work stoppages or
delays, or the cost associated with repairing the damage caused by the
insurgency on work previously completed. We also excluded the cost
associated with the training and equipping of Iraqi security forces, or
the costs borne by DOD in maintaining, equipping, and supporting U.S.
troops in Iraq.

For the 16 contracts we reviewed, we identified whether the agencies or
the contractors had initially projected the cost of obtaining private
security services. We reviewed various documents, including agency
acquisition strategy plans and price negotiation memoranda; the
contractor's cost proposals and security plans; and interviewed agency and
contractor officials. We identified the actual costs incurred for security
services and equipment by reviewing various cost documentation, including
invoices, vouchers, and billing logs submitted by the contractors and
their security provider(s) through the period ending December 31, 2004. We
analyzed this information to determine

o  the total amount billed by the contractor to the government;

o  the amount billed by security subcontractors to the contractor; and

o 	the amount billed for other security-related expenses, such as armored
vehicles, body armor, communication, transportation costs, lodging, and
other security-related equipment.

We estimated the percentage of costs accounted for by private security
providers and for security-related equipment by comparing the combined
amount billed for these activities to the total amount billed by the
reconstruction contractor to the government. We did not attempt to
comprehensively identify costs that may have been incurred by
subcontractors or lower tier contractors. We did, however, request
information from the contractors as to whether their subcontractors
required security above that which would typically be required, and if so,
whether the subcontractor arranged for its own security or relied on
security provided by the reconstruction contractor. We obtained examples

Appendix I Scope and Methodology

and cost information on selected cases in which subcontractors provided
their own security.

As part of our efforts, we reviewed pertinent sections of the Federal
Acquisition Regulation, and in particular, the subcontractor competition
and notification requirements provided for under Part 44; and relevant
CPA, DOD, State Department, and USAID acquisition regulations, policy
memoranda and guidance. We coordinated our work with and reviewed reports
prepared by the Inspectors General for DOD, State, and USAID; the Special
Inspector General for Iraq Reconstruction; and the Defense Contract Audit
Agency.

To determine whether private security providers were hiring former
military servicemembers, we interviewed three private security providers
from the United States that are working in Iraq and discussed the skill
sets they hire. Additionally, we spoke with officials at the Marine Corps
and Navy human resources commands; the Air Force's Deputy Chief of Staff,
Personnel; the Army's Human Resources Command Military Police Branch and
the Special Operations Command Personnel Division to ascertain whether
certain military occupational specialties and ranks were seeing increased
attrition and if private security providers were affecting military
attrition. We also reviewed a transcript of a congressional hearing on
Special Operations Forces personnel issues held in July 2004.

To assess the extent to which military occupational specialties utilized
by private security providers in Iraq are seeing increased attrition we
obtained attrition information from the Defense Manpower Data Center's
Active Duty Military Officer and Enlisted Master Files, which is an
inventory of all individuals on active duty in the services. Our analysis
was limited to active duty personnel and did not include reservists. The
Center provided information on personnel numbers and losses for fiscal
years 2000, 2001, 2002, 2003, and 2004. Attrition for the purposes of this
report is an active duty member who is on active duty at the start of a
given fiscal year and is no longer on active duty in the same service in
the same pay category at the end of that fiscal year. An enlisted member
who becomes a warrant or commissioned officer (or vice versa) or a member
who changes services is considered to be a loss. The fiscal year lasts
from October 1st of the previous year to September 30th of the named year.
For example, fiscal year 2000 lasted from October 1, 1999 to September 30,
2000. Personnel numbers were calculated as the total number of members at
the start of the fiscal year (for example, October 1, 1999 for fiscal year
2000). Losses are the endforce members who have attrited during the fiscal
year (For

Appendix I Scope and Methodology

example, for fiscal year 2000, losses would be the number of personnel
attrited from October 1, 1999 to September 30, 2000.).

We received data from the Defense Manpower Data Center on active duty
attrition rates for five military occupational specialties: special
forces, military police, infantry, para-rescue, and combat controller.
These military occupational groupings were selected because they
represented military occupational skills most sought after by private
security providers working in Iraq, as determined through interviews with
officials at the human resources commands and private security companies.
These data were then analyzed to determine whether attrition rates had
increased in the past five years and whether servicemembers were
separating from the military at increasing rates in certain ranks or
number of years of service.

We assessed the reliability of the Defense Manpower Data Center's Active
Duty Military Personnel Master file by (1) reviewing existing information
about the data and the system that produced them, and (2) interviewing
agency officials knowledgeable about the data. We determined that the data
were sufficiently reliable for the purpose of this report.

We visited or interviewed officials from the following organizations
during our review:

Department of State

o  Bureau of Diplomatic Security, Washington, D.C.;

o  U.S. Embassy, Amman, Jordan;

o 	The U.S. Agency for International Development, Washington, D.C.,
Baghdad, Iraq; and Amman, Jordan.

Department of Defense

o 	Office of the Under Secretary of Defense, Personnel and Readiness,
Military Personnel Policy, the Pentagon;

o  The Defense Contract Audit Agency, Fort Belvoir, Virginia.

Appendix I Scope and Methodology

Department of the Air Force

o 	Office of the Deputy Chief of Staff, Personnel, Force Management
Division.

Department of the Army

o 	United States Army Human Resources Command Military Police Branch,
Alexandria, Virginia;

o  United States Army Central Command (Rear), Fort McPherson, Georgia;

o  Project and Contracting Office (Rear), the Pentagon;

o  U.S. Army Corps of Engineers, Washington, D.C.;

o  Southwestern Division, Dallas, Texas;

o  Transatlantic Program Center, Winchester, Virginia;

o  Gulf Regional Division, Baghdad, Iraq;

o  The Army Contracting Agency, Fort Eustis, Virginia;  o 1st Armored
Division, Wiesbaden, Germany;  o 82nd Airborne Division, Fort Bragg, North
Carolina;  o 2nd Armored Cavalry Regiment, Fort Polk, Louisiana;  o 1st
Cavalry Division, Fort Hood, Texas. Department of the Navy

o  Naval Personnel Command, Millington, Tennessee;

o  Marine Corps Manpower Plans and Policy Division, Washington, D.C.;  o
1st Marine Corps Expeditionary Force, Camp Pendleton, California.

Appendix I Scope and Methodology

Unified Combatant Commanders

o  United States Central Command, MacDill Air Force Base, Florida;

o 	United States Special Operations Command Personnel Division, MacDill
Air Force Base, Florida.

Contractors

o  Aegis Defence Services, Ltd., London, United Kingdom;

o  ArmorGroup, London, United Kingdom;

o  BearingPoint Inc., McLean, Virginia;

o  Bechtel National, Inc., San Francisco, California;

o  Blackwater USA, Moyock, North Carolina;

o  CONTRACK International, Inc., Arlington, Virginia;

o  Control Risk Group, London, United Kingdom;

o  Creative Associates International, Inc., Washington, D.C.;

o  DynCorp International, Irving, Texas;

o  Fluor Intercontinental, Inc., Greenville, South Carolina;

o  General Electric, Atlanta, Georgia;

o  Global Risk Strategies, London, United Kingdom;

o  Kellogg Brown and Root Services, Inc., Houston, Texas;

o  Olive Security, London, United Kingdom;

o  Parsons Corporation, Pasadena, California;

o  Perini Corporation, Framingham, Massachusetts;

o  Research Triangle Institute, Research Triangle Park, North Carolina;

Appendix I Scope and Methodology

o  Triple Canopy, Lincolnshire, Illinois;

o  The Hart Group, London, United Kingdom; and

o 	Washington Group International, Inc., Boise, Idaho; and Princeton, New
Jersey.

Industry Associations

o 	American Society for Industrial Security International, Alexandria,
Virginia;

o  International Peace Operations Association, Washington, D.C.;

o  International Security Management Association, Buffalo, Iowa;

o  Private Security Company Association of Iraq, Baghdad, Iraq;

o  Professional Services Council, Arlington, Virginia.

We conducted our review from May 2004 through June 2005 in accordance with
generally accepted government auditing standards.

                                  Appendix II

                    Comments from the Department of Defense

Appendix II
Comments from the Department of Defense

Appendix II
Comments from the Department of Defense

                                  Appendix III

                     Comments from the Department of State

Appendix III
Comments from the Department of State

Appendix III
Comments from the Department of State

Appendix IV

Comments from U.S. Agency for International Development

Appendix V

                    GAO Contacts and Staff Acknowledgements

GAO Contacts 	William Solis (202) 512-8365 David Cooper (617) 788-0555

Acknowledgments 	In addition to the contacts named above, Steve Sternlieb,
Timothy DiNapoli, Carole Coffey, Gary Delaney, John Heere, William
Petrick, Timothy Wilson, Moshe Schwartz, Kate Walker, Robert Ackley, David
Mayfield, and Sylvia Schatz made key contributions to this report.

GAO's Mission	The Government Accountability Office, the audit, evaluation
and investigative arm of Congress, exists to support Congress in meeting
its constitutional responsibilities and to help improve the performance
and accountability of the federal government for the American people. GAO
examines the use of public funds; evaluates federal programs and policies;
and provides analyses, recommendations, and other assistance to help
Congress make informed oversight, policy, and funding decisions. GAO's
commitment to good government is reflected in its core values of
accountability, integrity, and reliability.

Obtaining Copies of The fastest and easiest way to obtain copies of GAO
documents at no cost

is through GAO's Web site (www.gao.gov). Each weekday, GAO postsGAO
Reports and newly released reports, testimony, and correspondence on its
Web site. To Testimony have GAO e-mail you a list of newly posted products
every afternoon, go to

www.gao.gov and select "Subscribe to Updates."

Order by Mail or Phone	The first copy of each printed report is free.
Additional copies are $2 each. A check or money order should be made out
to the Superintendent of Documents. GAO also accepts VISA and Mastercard.
Orders for 100 or more copies mailed to a single address are discounted 25
percent. Orders should be sent to:

U.S. Government Accountability Office 441 G Street NW, Room LM Washington,
D.C. 20548

To order by Phone:	Voice: (202) 512-6000 TDD: (202) 512-2537 Fax: (202)
512-6061

  To Report Fraud, Contact:
  Waste, and Abuse in Web site: www.gao.gov/fraudnet/fraudnet.htm

E-mail: [email protected] Programs Automated answering system: (800)
424-5454 or (202) 512-7470

Congressional	Gloria Jarmon, Managing Director, [email protected] (202)
512-4400 U.S. Government Accountability Office, 441 G Street NW, Room 7125

Relations Washington, D.C. 20548

Public Affairs	Paul Anderson, Managing Director, [email protected] (202)
512-4800 U.S. Government Accountability Office, 441 G Street NW, Room 7149
Washington, D.C. 20548
*** End of document. ***