Rebuilding Iraq: U.S. Water and Sanitation Efforts Need Improved
Measures for Assessing Impact and Sustained Resources for
Maintaning Facilities (07-SEP-05, GAO-05-872).
After security conditions in Iraq began to deteriorate in June
2003, the U.S.-led Coalition Provisional Authority (CPA) included
restoring essential services in Iraq, such as water and
sanitation, as part of its strategy for establishing a secure,
peaceful, and democratic Iraq. From 1991 to 2003, a decreasing
number of Iraqis had access to safe drinking water and sanitation
services, and water-borne disease rates rose. The United States
has made available $2.6 billion for rebuilding the water and
sanitation sector. As part of GAO's review of Iraq reconstruction
under the Comptroller General's authority, we assessed U.S.
activities in the water and sanitation sector, including (1) the
funding and status of U.S. activities, (2) U.S. efforts to
measure progress, (3) the factors affecting the implementation of
reconstruction activities, and (4) the sustainability of
U.S.-funded projects.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-05-872
ACCNO: A35919
TITLE: Rebuilding Iraq: U.S. Water and Sanitation Efforts Need
Improved Measures for Assessing Impact and Sustained Resources
for Maintaning Facilities
DATE: 09/07/2005
SUBJECT: Appropriated funds
Cost analysis
Electric energy
Electric power generation
Foreign governments
International relations
Performance measures
Potable water
Program evaluation
Schedule slippages
Strategic planning
Surveys
Wastewater treatment
Water quality
Water resources development
Water treatment
Iraq
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GAO-05-872
United States Government Accountability Office
GAO
Report to Congressional Committees
September 2005
REBUILDING IRAQ
U.S. Water and Sanitation Efforts Need Improved Measures for Assessing Impact
and Sustained Resources for Maintaining Facilities
GAO-05-872
[IMG]
September 2005
REBUILDING IRAQ
U.S. Water and Sanitation Efforts Need Improved Measures for Assessing Impact
and Sustained Resources for Maintaining Facilities
What GAO Found
The United States has made some progress in rebuilding Iraq's water and
sanitation sector. As of July 2005, State had allocated $2.6 billion; of
this amount, agencies had obligated $1.8 billion and disbursed an
estimated $450 million, mostly to support large-scale water and wastewater
treatment projects. In addition, about $384 million in Iraqi and
international funds had been obligated for the sector-about 21 percent of
U.S. obligations. As of June 2005, 18 of 54 task orders for projects under
five major U.S. contracts had been completed. For example, USAID's
contractor repaired six sewage treatment plants, two water treatment
plants, and an urban water supply in southern Iraq.
State has set broad goals for providing essential services in Iraq, but
the lack of sound performance data and measures for the water and
sanitation sector present challenges in determining the impact of U.S.
projects. State's ability to measure the provision of essential services,
such as access to water and sanitation, is limited by a lack of water
metering and measures of water quality in Iraq. In the absence of such
measures, State tracks the number of projects started and completed, but
State was unable to substantiate which projects were included in its
reported numbers. Moreover, because these data do not measure the
availability or quality of water and sanitation services, it is difficult
to determine how U.S. efforts are contributing to the goal of improving
access to essential services. However, USAID-funded surveys report that
Iraqis experience low levels of access and satisfaction with water and
sanitation services. These surveys demonstrate the potential for gathering
data over time that could be used to gauge the progress of U.S.
reconstruction efforts.
Poor security and management challenges have adversely affected the U.S.
water and sanitation reconstruction program, leading to project delays and
increased costs. One U.S. agency estimated that the security environment
has added an average of about 7 percent to its water sector project costs.
Initial cost estimates of 25 to 50 percent below actual costs and delays
in funding and awarding task orders also led to a reduced program scope
and delays in starting projects. Other factors that impede progress and
increase cost include lack of agreement on project scope, staffing
turnover, inflation, unanticipated site conditions, and uncertain
ownership of project sites.
As of June 2005, projects costing about $52 million and turned over to
Iraqi management were not operating as intended due to looting, unreliable
electricity, or inadequate Iraqi staff and supplies. In March 2005, State
reallocated $25 million for additional support at USAID's completed
projects, and agencies have begun risk forecasting and planning to address
sustainability issues. However, these efforts are in their early stages,
and it is unclear if they will address the long-term ability of the Iraqi
government to support, staff, and equip remaining large-scale water and
sanitation projects for which the United States has obligated more than a
billion dollars.
United States Government Accountability Office
Contents
Letter
Results in Brief
Background
The United States Has Completed Some Projects, but Many Large
Scale Efforts Were Delayed Limited Performance Data and Measurements Make
It Difficult to Determine Impact Security and Management Challenges Have
Adversely Affected Implementation of Water and Sanitation Projects
Iraq's Lack of Capacity to Operate and Maintain U.S.-Funded Projects Led
to Inoperable Facilities and Greater U.S. Focus on Improving Project
Sustainability
Conclusion
Recommendations for Executive Action
Agency Comments
1
2 4
7
13
19
25 29 29 30
Appendix I Objectives, Scope & Methodology
Appendix II Comments from the Department of State
Appendix III Comments from the U.S. Agency for International Development
Appendix IV GAO Contact and Staff Acknowledgments
Table
Table 1. Status of Major Contractors' Water and Sanitation Task Orders,
June 2005 11
Figures
Figure 1. Available Fiscal Year 2004 IRRF Funds Allocated for Water and
Sanitation 9
Figure 2. Iraqi Satisfaction with Water Supply by Governorate, February
2005 17 Figure 3. Iraqi Satisfaction with Adequacy of Sewerage and
Wastewater Disposal by Governorate, February 2005 18
Abbreviations
AIRP Accelerated Iraq Reconstruction Program CERP Commanders' Emergency
Response Program CH2M Hill/PWI CH2M Hill and Parsons Water Infrastructure
CHRRP Commanders' Humanitarian Relief and
Reconstruction Program CPA Coalition Provisional Authority DFI Development
Fund for Iraq DOD Department of Defense FluorAMEC Fluor (U.S. company) and
AMEC (British company) IRMO Iraq Reconstruction and Management Office IRRF
Iraq Relief and Reconstruction Fund IRFFI International Reconstruction
Fund Facility for Iraq PCO Project and Contracting Office PMO Project
Management Office UN United Nations USAID U.S. Agency for International
Development WGI/B&V Washington Group International/Black & Veatch
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.
United States Government Accountability Office Washington, DC 20548
September 7, 2005
Congressional Committees:
After security conditions in Iraq began to deteriorate in June 2003, the
U.S.-led Coalition Provisional Authority (CPA) included restoring
essential services, such as water and sanitation, as part of their
strategy for establishing a secure, peaceful, and democratic Iraq.
According to a 2003 UN/World Bank assessment,1 years of conflict,
international sanctions, and mismanagement by the prior regime led to
deterioration in the infrastructure providing essential services. From
1991 to 2003, a decreasing number of Iraqis had access to safe drinking
water and sanitation, and water-borne disease rates rose. As of July 2005,
the United States had appropriated about $24 billion for relief and
reconstruction in Iraq, including nearly $2.6 billion for rebuilding the
water and sanitation sector.
As part of GAO's review of reconstruction efforts in Iraq initiated under
the Comptroller General's authority, we examined U.S. activities directed
at rebuilding the water and sanitation sector. Specifically, we assessed
(1) the funding and status of U.S. activities, (2) U.S. efforts to measure
progress, (3) the factors affecting the implementation of reconstruction
activities, and (4) the sustainability of U.S.-funded projects.
To accomplish our objectives, we reviewed and analyzed U.S. government
agency documents and contractor reports. We also met with officials from
the Department of State, the U.S. Agency for International Development
(USAID), the Department of Defense (DOD) Project and Contracting Office
(PCO), and contractors undertaking reconstruction efforts. Although we did
not travel to Iraq due to security concerns, we interviewed U.S. officials
based in Iraq by telephone and exchanged information through e-mail. We
also met with officials from contractors and U.S. agencies in the United
States who had returned after tours of duty in Iraq. In addition, we
reviewed U.S. government-funded surveys that document Iraqi perceptions of
the quality and quantity of water and
1United Nations Development Group and World Bank Group, United
Nations/World Bank Joint Iraq Needs Assessment (October 2003).
sanitation services. Appendix I contains a more detailed description of
our scope and methodology.
We conducted our review from September 2004 through August 2005 in
accordance with generally accepted government auditing standards.
Results in Brief
The United States has allocated resources and made some progress in
undertaking and completing activities to rebuild Iraq's water and
sanitation infrastructure. U.S. appropriations for this sector were as
high as $4.6 billion in 2004, but this level was subsequently reduced to
$2.6 billion to address other priorities, such as improving security and
increasing employment. Of this amount, U.S. agencies had obligated $1.8
billion and disbursed an estimated $450 million as of June 2005. U.S.
funding was not sufficient-nor was it intended-to address all of Iraq's
water and sanitation needs as identified in 2003 condition assessments. As
of June 2005, about $251 million in Iraqi funds and $133 million in
international funds had been obligated for the sector-about 21 percent of
U.S. obligations. USAID had awarded 30 task orders for project activities
and PCO had awarded 24 task orders.2 USAID's contractor had completed 18
task orders, including the repair of six sewage treatment plants, two
water treatment plants, and a primary urban water supply in southern Iraq.
However, 12 of the completed task orders had been delayed by 6 months or
more. PCO's contractors had not completed any task orders, but they plan
to complete 9 task orders by the end of 2005 and the remaining 15 by 2008.
PCO task orders include the repair of municipal water supplies, sewage
collection systems, dams, and a major irrigation project.
It is difficult to determine the overall progress and impact of U.S.
efforts because of inadequate performance data and measures. According to
State officials, the CPA's April 2004 goal to increase potable water to 90
percent of the population was unrealistic because it was set without
baseline data. A senior State official expects U.S. efforts to increase
water service access to about 50 or 60 percent. U.S. agencies track
progress through the numbers of projects under way and completed and
expected gains in water and sewage treatment capacity. However, these
measurements are limited in providing a complete picture of progress and
the impact of U.S. projects in improving access to water and sanitation
services. For
2Task orders are placed against established contracts for the performance
of tasks during the period of the contracts.
example, although State reported that 143 projects3 were complete as of
early July 2005, it could not document the location, scope, and cost of
these projects. Moreover, reporting only the number of projects completed
or under way provides little information on how U.S. efforts are improving
the amount and quality of water reaching Iraqi households or their access
to sanitation services. The availability of data is limited by the lack of
water metering and water quality measurements. For example, due to
problems in the distribution network, water that is potable at the
treatment plant may be lost through leakage or contaminated by the time it
reaches users. However, a recent USAID survey found that just under half
of respondents rated their water supply as good to very good and fewer
than 20 percent rated their sewerage and wastewater disposal as good to
very good. These surveys demonstrate the potential for gathering data to
gauge the progress of U.S. reconstruction efforts.
Poor security and a variety of management challenges have affected U.S.
efforts to improve the water and sanitation sector in Iraq. Security
conditions have led to project delays and increased costs for security
services. For example, work was suspended at a sewer repair project in
central Iraq for 4 months in 2004 due to security concerns. PCO has
estimated that the deteriorated security environment has increased water
and sanitation project costs by 7 percent. In addition, PCO found initial
CPA cost estimates to be 25 to 50 percent below actual costs, contributing
to a reduced scope for the water and sanitation program. Agency and
contractor officials cited other factors that impeded progress and
increased program cost, including a lack of agreement among U.S. agencies,
contractors, and Iraqi authorities on project issues; staffing turnover;
an inflationary environment that made it difficult for contractors to
submit accurate cost estimates; unanticipated project site conditions; and
uncertain ownership of project sites.
As of June 2005, U.S.-funded water and sanitation projects representing
about $52 million of the $200 million in completed projects were either
not operating or were operating at lower capacity. One repaired wastewater
plant was partially shut down due to the looting of key electrical
equipment. In addition, two projects lacked a reliable power supply, one
lacked sufficient staff to operate properly, and one lacked both adequate
power supply and staff. Repaired water plants in one southern governorate
3We could not determine which of these projects were included in the task
orders reported by contractors.
lacked adequate electricity and necessary water treatment chemicals. In
late August 2004, USAID's contractor began to identify potential
sustainability problems, such as poor operations and maintenance
procedures. In late March 2005, nearly 7 months after the initial report
of these concerns, State reallocated $25 million to USAID for up to 1 year
of additional on-site operating assistance and supplies at USAID's
completed projects. In proposing the reallocation, the U.S. embassy in
Iraq stated that it was moving from the previous model of building and
turning over projects to Iraqi management toward a "build-train-turnover"
system to protect the U.S. investment in Iraq's infrastructure. In March
2005, PCO provided $10.3 million for a 12-month capacity development
initiative that includes baseline service assessments, operations and
maintenance planning and other efforts in eight governorates. However,
U.S. assistance efforts do not address the long-term ability of the Iraqi
government to support, staff, and equip these facilities. Iraqi ministry
capacity remains an obstacle to the success of more than $1 billion in
U.S. projects expected to be complete between mid-2005 and 2008.
This report recommends that the Secretary of State should, within the
limitations and difficulties of working in an unstable security
environment, establish and implement improved indicators and measures that
assess how U.S. efforts are improving the quality and quantity of water
and sanitation services in Iraq. The report also recommends that the
Secretary work with Iraqi ministries to assess the resources needed to
operate and maintain new and repaired water and sanitation facilities
after they are turned over to Iraqi management and work with the Iraqi
government to ensure that Iraq has these resources.
In commenting on a draft of this report, the Department of State and USAID
agreed with our findings and conclusions. State concurred with our
recommendations and stated that it is taking steps to begin implementing
them. The Departments of Defense and State also provided technical
comments, which we incorporated where appropriate.
Background Water and sanitation services in Iraq deteriorated after the
1991 Gulf War due to lack of maintenance, inadequate skilled manpower,
international sanctions, and war damage. In 2003, looting at the outbreak
of Operation Iraqi Freedom destroyed the equipment and materials needed to
operate
water treatment and sewerage facilities.4 According to the 2003 UN/World
Bank Joint Iraq Needs Assessment, Iraq produced enough water before the
1991 Gulf War to supply more than 95 percent of urban Iraqis and 75
percent of rural Iraqis. By 2003, these production levels had fallen to
about 60 percent and 50 percent, respectively. At both times, however, the
percentage of Iraqis actually receiving an adequate amount of potable
water was much lower due to heavy leakage and contamination from the
delivery network. The assessment also found that, although 80 percent of
Baghdad's population had sewerage access, power outages caused shutdowns
and blockages of the sewage system, leading to backups of raw sewage in
the streets. Less than 10 percent of the urban population outside Baghdad
was served by sewage systems, and rural areas and northern Iraq had no
access to piped sewerage. Diseases related to unsafe water and poor
sanitation increased significantly between 1990 and 2000. At the time of
the 2003 assessment, no sewage treatment plants were operational, and raw
sewage was discharged into rivers and waterways. Furthermore, sewage
leaked into the water network, which was too damaged to keep contaminants
out. These sources of contamination caused levels of waterrelated diseases
to escalate. According to a UN Children's Fund report, the number of
typhoid cases rose from 2,240 in the pre-1991 period to 27,000 in 1996.5
According to the official who led the 2003 UN/World Bank assessment,
steady attrition of human and physical capital was the principal cause of
the decline in Iraq's water and sanitation services. Through most of the
1990s, Iraq's water and sanitation sector lacked the funding, staff,
equipment, and spare parts needed to keep facilities running. The sector
did not have a steady source of operating funds, and salaries were too low
to retain trained and educated staff, many of whom left the country.
International isolation prevented exposure to outside knowledge and the
development of necessary skills and led to spare parts shortages that made
routine maintenance difficult.
4United Nations Development Group and World Bank Group, United
Nations/World Bank Joint Iraq Needs Assessment (October 2003). Operation
Iraqi Freedom largely spared water and wastewater treatment plants;
however, water networks were seriously damaged. Baghdad's water network in
particular was subject to severe bomb damage, causing acute water
shortages that led residents to tap the network illegally.
5UN Children's Fund, The Situation of Children in Iraq: An Assessment
Based on the United Nations Convention on the Rights of the Child (New
York: Reprinted March 2003).
Two 2003 studies, based on limited assessments extrapolated to cover the
entire country, provided cost estimates for repairing Iraq's deteriorated
water and sanitation infrastructure. The UN/World Bank assessment
estimated that more than $4 billion would be needed through 2007 to
restore and expand the water and sanitation infrastructure past pre-1991
levels. Additional capital investments of nearly $2.8 billion would be
required to increase service coverage and reduce water losses. A
USAIDfunded assessment by Bechtel National, Inc., identified short-,
intermediate-, and long-term projects that could address Iraq's water and
sanitation needs at a potential cost of $6.5 billion over the next 10 to
20 years.
From May 2003 until the end of June 2004, the CPA was the UN-recognized
coalition authority led by the United States and United Kingdom that was
responsible for the temporary governance of Iraq and for overseeing,
directing, and coordinating the reconstruction effort. Within the CPA, the
Project Management Office (PMO) was established to provide project
management, prioritizing, and contract support for U.S.-funded
reconstruction projects. The CPA identified the initial U.S. efforts for
rebuilding Iraq's water and sanitation, which USAID managed and executed
with fiscal year 2003 funds. In May 2004, the President issued a National
Security Presidential Directive which stated that after the transition of
power to the Iraqi government, the State Department would be responsible
for all U.S. activities in Iraq, except for U.S. efforts relating to
security and military operations. These efforts would be DOD's
responsibility. On June 28, 2004, the CPA transferred power to a sovereign
Iraqi interim government, and the CPA was officially dissolved.
To replace the CPA's PMO, the Presidential Directive established two
temporary offices: (1) the Iraq Reconstruction and Management Office
(IRMO) to facilitate the transition of reconstruction projects to Iraq and
(2) PCO to facilitate acquisition and project management support for
U.S.funded reconstruction projects in various sectors, including water and
sanitation. IRMO is a State Department organization responsible for
strategic planning and for prioritizing requirements, monitoring spending,
and coordinating with the military commander. Iraq-based personnel from
both offices are under the authority of the U.S. chief of mission in
Baghdad, although the U.S. Department of the Army funds, staffs, and
oversees the operations of the PCO.
USAID and PCO administer the large-scale projects funded in fiscal year
2004. USAID and PMO awarded five contracts representing the majority of
U.S. funds obligated for water and sanitation reconstruction to three
firms.
USAID awarded the first of these contracts to Bechtel National, Inc. in
April 2003 with fiscal year 2003 funds for work across multiple
reconstruction sectors. In January 2004, USAID awarded a second,
competitively bid, multi-sector reconstruction contract to Bechtel with
fiscal year 2004 funds. In March 2004, PMO used fiscal year 2004
appropriated funds to competitively award three contracts for water and
sanitation reconstruction. PMO awarded one contract for improving water
resources nationwide to a joint venture between the U.S. companies
Washington Group International and Black & Veatch (WGI/B&V). PMO awarded
two other contracts to a joint venture between the U.S. firm Fluor and the
British company AMEC (FluorAMEC), one each for public works projects in
northern and southern Iraq. PMO also awarded a contract in March 2004 to a
joint venture between CH2M Hill and Parsons Water Infrastructure (CH2M
Hill/PWI) for program management services for water sector activities. For
PCO activities, CH2M Hill/PWI performs such duties as developing project
task orders, preparing government cost estimates, and preparing reports on
water sector status.
As of July 2005, State Department reallocations to other priorities in
Iraq had reduced funding designated for water and sanitation by almost
half, to about $2.6 billion, of which U.S. agencies had obligated about
$1.8 billion and disbursed an estimated $450 million. International and
Iraqi funds allocated for this sector totaled at least $384 million. Most
U.S. obligations have gone to long-term, large-scale water and wastewater
treatment projects that can take months or years to complete. As of June
2005, USAID's contractor had completed 18 task orders, although with many
delays. USAID and PCO expect to complete an additional 36 task orders from
2005 through 2008.
The United States Has Completed Some Projects, but Many Large Scale Efforts
Were Delayed
State Reallocated a Portion of Its Water and Sanitation Funds to Address
Other Iraq Needs
At its highest level, total U.S. appropriated funding for reconstruction
of Iraq's water and sanitation sector was about $4.6 billion; however, by
July 2005, State Department reallocations had reduced funding to about
$2.6 billion, a 44 percent decrease. As of the end of June 2005, agencies
had obligated $1.8 billion and disbursed an estimated $450 million.6 Even
at the level of $4.6 billion, U.S. funding would not have been
sufficient-nor was
6The disbursement figure for water and sanitation activities is estimated
due to limitations in agency reporting. For example, water and other
reconstruction activities under USAID's Local Governance Program are
reported in the democracy category, and DOD's reporting on some smaller
programs stops at the obligation level.
it intended-to address all of Iraq's water and sanitation needs as
identified by the UN/World Bank and Bechtel assessments. After State's
reallocations, U.S. obligations are almost five times greater than Iraqi
and international obligations for rebuilding Iraq's water and sanitation
sector.
Congress initially appropriated funding for Iraq reconstruction in fiscal
year 2003, and in fiscal year 2004, appropriated an additional, larger
amount. In April 2003, Congress passed the Emergency Wartime Supplemental
Appropriations Act.7 This legislation created the Iraq Relief and
Reconstruction Fund (IRRF) and appropriated about $2.48 billion in fiscal
year 2003 funds to the Fund for reconstruction activities in multiple
sectors. Of this amount, as of June 2005, USAID had obligated
approximately $270 million to water and sanitation projects. In November
2003, Congress enacted an additional emergency wartime supplemental act,
in which $18.4 billion was provided for the IRRF.8 From this $18.4
billion, Congress specifically allocated about $4.33 billion for
reconstruction of Iraq's water and sanitation sector. However, the Act
also permitted limited reallocation of fiscal year 2004 IRRF funds with
congressional notification. This $270 million in fiscal year 2003 funds
and $4.33 billion in fiscal year 2004 funds total the peak U.S.
appropriation for the water and sanitation sector of $4.6 billion.
As of July 5, 2005, the State Department had conducted a series of fiscal
year 2004 IRRF reallocations to address other priorities, thereby reducing
total IRRF funding for water and sanitation by about 44 percent, from $4.6
billion to $2.6 billion. The single largest reduction occurred in
September 2004, when State shifted $1.9 billion in fiscal year 2004 IRRF
funds from water and sanitation to increase support for security and law
enforcement, oil infrastructure enhancements, economic development, debt
forgiveness, Iraqi employment, and democracy and governance. Although
State's September 2004 reallocation did not cause cancellation of any
water sector projects already in progress, PCO cancelled some
projects-most of which were planned to start in mid-2005. Over the next 9
months, State made additional reallocations, transferring a total of $160
million in fiscal year 2004 IRRF water and sanitation funds to support
efforts such as job creation and electrical distribution. Figure 1 shows
the overall reduction in
7Congress enacted Public Law 108-11, the Emergency Wartime Supplemental
Appropriations Act, 2003 on April 16, 2003.
8Congress enacted Public Law 108-106, the Emergency Supplemental
Appropriations Act for Defense and for the Reconstruction of Iraq and
Afghanistan, 2004, on November 6, 2003.
available fiscal year 2004 IRRF funds allocated for water and sanitation.
As of June 2005, U.S. agencies had obligated $1.8 billion of the reduced
total of $2.6 billion. Of the allocated amount, about $450 million-17
percent- had been disbursed.
Figure 1. Available Fiscal Year 2004 IRRF Funds Allocated for Water and
Sanitation
According to a senior PCO official, U.S. funding was not meant to rebuild
Iraq's entire infrastructure but to lay the groundwork for a longer-term
reconstruction effort with anticipated significant assistance from
international donors. As of the end of June 2005, at least $384 million in
Iraqi and international funds had been obligated for rebuilding Iraq's
water and sanitation sector, slightly more than 21 percent of the $1.8
billion in U.S. obligations. Iraqi funding includes at least $239 million
from the Development Fund for Iraq (DFI) and about $12 million in seized
assets from the former regime.9 In addition, the International
Reconstruction
9According to UN Security Council Resolution 1483, the funds deposited
into the DFI were to be used to meet the costs of Iraqi civilian
administration, humanitarian needs, infrastructure repairs, economic
reconstruction, and other purposes benefiting the people of Iraq. The CPA
used the term "allocation" to reflect DFI obligations. We used the term
"obligations" for consistency of reporting. The 2005 budgets for the Iraqi
Ministries of Municipalities and Public Works, and of Water Resources also
included funding for capital project costs; however, we were unable to
determine the extent to which these funds have been made available.
Fund Facility for Iraq obligated about $133 million in international
donations for water and sanitation projects as of May 2005. 10
Funding Has Been Directed Primarily to Large-Scale Efforts that Are in
Progress
Some Large-Scale Water and Sanitation Projects Have Been Completed but
Delayed; Others Are Under Way
Water and sanitation construction projects funded by U.S. agencies in Iraq
generally fall into two categories: large-scale projects and
smaller-scale, quick-impact projects.11 As of June 2005, five contracts
issued by USAID and PCO, representing about 73 percent of all U.S. water
and sanitation obligations, supported a variety of large-scale efforts
that mostly remain in progress. By the end of June, USAID and PCO
contractors had completed 18 of their 54 task orders for large-scale
projects; however, these completed projects experienced delays.
Smaller-scale, quick-impact efforts are typically less complex, less
costly, and have received a smaller share of available U.S. funds. These
projects are designed to address local needs and create employment. Iraqi
funds have also been used for other water and sanitation projects.
As of June 2005, U.S. agencies had obligated about $1.3 billion of the
total $1.8 billion in available U.S. appropriated funding for large-scale
water and sanitation projects performed by USAID contractor Bechtel and
PCO contractors WGI/B&V and FluorAMEC. Some task orders have been
completed, but most work is still in progress. Table 1 shows the status of
these contracts as of June 2005.
10The International Reconstruction Fund Facility for Iraq comprises two
trust funds into which donors can make contributions-the World Bank Iraq
Trust Fund and the UN Development Group Iraq Trust Fund. Members of the
international community have also made bilateral donations for rebuilding
Iraq. As we reported in June 2004, the United States had been working with
the Iraqis to develop a database for tracking all bilateral commitments
made to reconstruction activities in Iraq. One year later, this database
for tracking all donor assistance projects in Iraq remains under
development with U.S. and UN assistance and has been transferred to the
Iraqis.
11According to PCO reporting, in addition to obligating funds to water and
sanitation construction projects, PCO has obligated about $127 million to
nonconstruction activities in the sector as of June 26, 2005. These
activities include procurement of trash trailers, sewage trucks, and
generators.
Table 1. Status of Major Contractors' Water and Sanitation Task Orders, June
2005
Total Obligations for Obligations for
Date of Task Task Orders Completed Task Orders in Completed Task
Contract Contract Ordersa in Progressa Task Orders Progress Orders
USAID
Bechtel Phase I 4/17/03 17 0 17 $0 $199 million
Bechtel Phase II 1/05/04 13 12 1 $365 million $0.7 million
PCO
b
WGI/B&V 3/11/04 10 10 0 $234 million $0
FluorAMEC - North and
c
South Contracts 3/23/04 14 14 0 $639 million $0
Totals 54 36 18 $1.2 billion $200 million
Sources: USAID, PCO, and contractor reporting.
aExcludes 2 cancelled USAID Phase I task orders, 3 USAID Phase I task
orders that were combined with other task orders in Phase I or Phase II, 2
cancelled PCO task orders and 3 PCO mobilization task orders.
bIncludes task orders awarded with both U.S. appropriations ($169 million)
and DFI funds ($65 million).
cIncludes task orders awarded with both U.S. appropriations ($566 million)
and DFI funds ($73 million).
Note: Numbers may not add due to rounding. Status information is as of the
end of June 2005; funding information is as of the end of March 2005 for
USAID and end of June for PCO.
As of June 2005, Bechtel had completed 18 of its total 30 task orders, but
most of these completed task orders experienced delays. Large-scale
efforts completed by Bechtel included the repair of six sewage treatment
plants, two water treatment plants, and the primary water supply for a
city in southern Iraq. Bechtel has completed one task order under its
Phase II contract, a design task costing about $700,000. Twelve task
orders remain under the second Bechtel contract, including water treatment
plants, sewer line construction, and a rural water supply project. Six of
these task orders are expected to be completed in 2005 and six in 2006.
Although USAID/Bechtel has completed 18 task orders, all 17 completed
Phase I task orders were delayed beyond the original completion date by
between 1 and 13 months. Twelve were delayed by 6 months or more.
PCO contractors WGI/B&V and FluorAMEC were awarded contracts nearly 1 year
after the initial Bechtel contract, and they had not completed any of
their 24 task orders as of June 2005. The contractors expect to complete 9
task orders by the end of 2005, 10 in 2006, 4 in 2007, and 1 in 2008.
WGI/B&V's task orders include four dam facilities and a major irrigation
project; FluorAMEC's include several municipal water supplies
U.S. Funds Small-Scale, Quick-Impact Projects
and three sewage collection systems. PCO contractors have also faced some
delays in completing work under the task orders.
U.S. agencies have also undertaken small-scale, quick-impact water and
sanitation projects. DOD, State, and PCO have conducted this work under
the following three programs:
o Under the Commanders' Emergency Response Program (CERP), military
commanders have undertaken urgent humanitarian relief and reconstruction
projects in Iraqi communities in their areas of responsibility. Agency
data as of June 30, 2005 indicated that about $56.1 million in Iraqi and
fiscal year 2004 U.S. funds had been obligated to more than 2,800 CERP
water and sanitation projects. CERP projects have helped to repair and
augment water and sanitation systems and include canal cleanups, well
construction, and water purification.
o State established the Commanders' Humanitarian Relief and
Reconstruction Program (CHRRP) in September 2004 with $86 million in
response to the perceived effectiveness of the CERP, according to a senior
State official. A major CHRRP initiative was to connect large water and
sewer infrastructure projects to homes in central Iraq. Agency data as of
June 30, 2005 indicated that about $74.3 million in fiscal year 2004 U.S.
funds had been obligated for 60 CHRRP water and sanitation projects in
central Iraq. Other planned projects include rehabilitation of irrigation
canals and procurement of landfill equipment.
o PCO has provided funds for contracting directly with Iraqi
construction firms to conduct small water system repairs. According to PCO
reporting from April 2005, PCO has budgeted about $70 million for this
effort and plans to undertake 145 projects.
USAID also has funded small-scale, quick-impact water and sanitation
projects. According to our analysis of USAID and contractor data, more
than 1,900 projects with an average value of about $100,000 had been
funded as of May 2005. These projects include neighborhood trash cleanups,
provision of irrigation pumps, sewer cleanouts, and installation of
potable water networks. USAID has implemented this work through
contracting partners and nongovernmental organizations. The goals of
USAID's quick-impact projects include employing Iraqis and satisfying
local needs as identified by community members.
Additional Water and Sanitation Projects Have Been Funded from Iraqi
Revenues
Limited Performance Data and Measurements Make It Difficult to Determine
Impact
In April 2004, the CPA created the Accelerated Iraq Reconstruction Program
(AIRP), which, as of mid-June 2005, included 125 quick-impact and
large-scale projects funded with a total of $211 million in Iraqi DFI
funds. The AIRP is a "legacy" program of DFI-funded projects that CPA had
awarded but not completed before its dissolution in June 2004. PCO
administers the AIRP on behalf of the State Department. Although AIRP
includes nearly 25 times as many quick-impact water sector projects as it
does large-scale water sector projects, the larger projects have received
nearly twice as much funding.12 As of June 2005, Iraqi contractors had
received about $73 million in DFI obligations for 120 water and sanitation
projects under the AIRP, and PCO contractors WGI/B&V and FluorAMEC had
received about $139 million for 5 projects. The cost of AIRP projects done
by Iraqi contractors ranges considerably, with the lowest at $5,000, the
highest at $5.6 million, and the median at $250,000. AIRP projects were
developed through consultations with Iraqi governors, engineering teams,
and members of local councils, who were asked to identify quick-impact
projects that would benefit the local population.
State has set broad goals for providing essential services in Iraq, but
the lack of sound performance data and measures for the water and
sanitation sector present challenges in determining the impact of U.S.
projects. State's ability to measure the provision of essential services,
such as access to water and sanitation, is limited by a lack of water
metering and measures of water quality in Iraq. In the absence of such
measures, State tracks the number of projects started and completed, but
State was unable to substantiate which projects were included in its
reported numbers. Moreover, because these data do not measure the
availability or quality of water and sanitation services, it is difficult
to determine how U.S. efforts are contributing to the goal of improving
access to essential services. However, USAID-funded surveys demonstrate
the potential for gathering data over time that could be used to gauge
progress of U.S. reconstruction efforts. These surveys report that Iraqis
experience low levels of access and satisfaction with water and sanitation
services.
12According to a PCO official, after the dissolution of the CPA, the
United States, per agreement with the Iraqi Finance Minister, manages the
AIRP projects but may not award new ones.
U.S. Goals for Improving Iraq's Water and Sanitation Sector Are Broad
In April 2004, the CPA strategic plan quantified targets for increasing
Iraqi access to water and sanitation services. The CPA's goals at that
time were to increase potable water access to 90 percent of Iraqis, to
increase sewerage access to 15 percent of Iraqis, and to reduce water
losses from 60 percent to 40 percent. The CPA expected that these targets
would be met at the completion of PMO projects in 2 to 3 years. According
to State and IRMO officials, however, the CPA goals were unrealistic
because they were set without having baseline data on the condition of
Iraq's water and sanitation infrastructure and the lack of water metering.
According to a State official, the baseline data is not reliable, even if
it is available.
State assumed responsibility for managing the U.S. reconstruction effort
following the CPA's dissolution and the transfer of power to an interim
Iraqi government. The Iraq Reconstruction and Management Office (IRMO), a
temporary office within the State Department, is responsible for strategic
planning, setting priorities, and monitoring spending. State has set forth
seven strategic objectives for Iraq reconstruction in the national
security strategy for Iraq. One of these objectives is providing essential
services, such as water and sanitation, but details of the water and
sanitation objectives are classified. A senior IRMO official expected
completion of the U.S. program to increase water access to about 50 or 60
percent of the Iraqi population, far less than the 90 percent CPA
initially outlined.
Challenges in Measuring Water and Sanitation Access and Quality
The absence of water metering in Iraq greatly hinders the ability of the
United States to assess progress toward the broader goal of providing
essential services and improving Iraq's water and sanitation sector. Iraq
does not have a comprehensive system of area meters or residential meters
that would help determine how much water in the distribution network
reaches intended users. Water distribution networks are subject to some
water loss or undocumented water usage, which can occur through leakage,
unmetered but legitimate use such as in government buildings, or illegal
connections. PCO and State officials have estimated water losses in Iraq
to be about 60 percent for the country as a whole. By comparison, a 1991
survey cited by the World Health Organization found losses of 25 to 45
percent in developing countries. In the absence of metering, it is
difficult to quantify the amount of water reaching users.
Data on treatment capacity and sanitation access do not encompass quality
measures and also hinder U.S. ability to gauge progress toward its goal of
providing essential services. For example, because of problems with the
distribution network, water that is potable at the treatment plants
may be contaminated by the time it reaches users. According to the PCO
water sector lead, potable water and sewage lines in Iraq are sometimes
adjacent to each other, allowing leaking sewage to enter the water mains
when there is insufficient pressure in the lines. Furthermore, while
Iraqis in some urban areas may be connected to a public sewer, according
to a recent report,13 the sewage network may not be sufficient to safely
transport waste away from the home and streets.
In the absence of metering and quality measures, State and other U.S.
agencies track reconstruction progress using other performance data, but
these data have limitations. State tracks and reports the number of
projects in progress and the number of projects completed. As of July 3,
2005, State reported that 143 projects were complete. However, State could
not document the location, scope, or cost of the projects included in this
reporting, thereby limiting an evaluation of the significance of completed
projects. We also could not reconcile State's figures with other data from
PCO and USAID. For example, as of June 28, 2005, PCO reported that it had
completed 43 small projects, and USAID reported the completion of 18
larger-scale task orders and many more small projects. It is unclear how
many projects may be included in these task orders. Furthermore, even if
these data could be substantiated and reconciled, this type of reporting
does not provide information on how U.S. efforts are improving Iraqi
access to water and sanitation services or the quality of those services.
Increases in water treatment capacity may help gauge progress, but this
measure also has limitations when it comes to understanding the level of
access provided. Currently, PCO expects to provide just over a million
cubic meters per day of additional water treatment capacity as part of the
PCO reconstruction program. PCO has estimated the number of expected
beneficiaries from the added capacity by dividing the increased capacity
by the estimated volume of water used by the average Iraqi. Although PCO
uses what it believes is a conservative demand estimate that attempts to
take into account water losses, plant efficiency, and industrial usage,
the actual ultimate benefit to Iraqis is uncertain.
13Iraq Ministry of Planning and Development Cooperation and UN Development
Program, Iraq Living Conditions Survey 2004 (Baghdad, Iraq: April 2005).
Surveys Can Provide Information on Access to Water and Sanitation Services
and Satisfaction with Service Quality
USAID has funded four Iraq Quality of Life Survey Reports through its
Local Governance Program that provide important information about the
level of access to water and sanitation services and Iraqi satisfaction
with those services.14 Contractors, working with local Iraqis as survey
enumerators, surveyed Iraqis about a number of issues, including their
access to and satisfaction with essential services. Although certain areas
could not be surveyed due to security constraints, the survey reports
provide data for each of Iraq's 18 governorates, as well as nationwide
data.
The most recent survey report, completed in February 2005, found that just
under half of respondents rated their level of water supply as good to
very good. Fewer than 20 percent of respondents rated the quality of
sewerage and wastewater disposal as good to very good. Governorates in
southern Iraq in particular showed particularly low levels of satisfaction
with the water supply. See figures 2 and 3 for the most recent survey data
on satisfaction with water supply and adequacy of sewerage and wastewater
disposal at the governorate level.15
14Survey reports are dated October-November 2003, June 2004, September
2004, and February 2005.
15The USAID contractor reported a good overall response rate to the
survey. However, response rates per governorate and per question were not
provided, and sampling errors were not calculated, so the margin of error
for the responses is unknown. In addition, the responses were not weighted
by governorate, although the samples by governorate were not strictly
proportional. For example, while Baghdad contains about a third of Iraq's
urban population, its sample represented only about a quarter of the
entire sample for Iraq. As a result, it is possible that responses from
some governorates are more influential than responses from others.
Figure 2. Iraqi Satisfaction with Water Supply by Governorate, February
2005
Figure 3. Iraqi Satisfaction with Adequacy of Sewerage and Wastewater
Disposal by Governorate, February 2005
These data provide insight into Iraqi satisfaction with the level of
access to water and sanitation services and demonstrate the potential for
gathering data over time that could be used to gauge progress of U.S.
reconstruction efforts. In commenting on our July 2005 report on Iraq
reconstruction, the State Department stated that it has not allocated
money for satisfaction surveys because the surveys are expensive and
difficult and dangerous to complete in a wartime environment.16 In
contrast, USAID has included
surveys as part of the agency's efforts to assess the quality of a variety
of essential services provided to the Iraqi people. USAID has completed
four surveys since October 2003 and intends to continue periodic surveys.
16GAO, Rebuilding Iraq: Status of Funding and Reconstruction Efforts,
GAO-05-876 (Washington, D.C.: July 28, 2005).
Security and Management Challenges Have Adversely Affected Implementation of
Water and Sanitation Projects
Poor security and a variety of management challenges have adversely
affected the implementation of the U.S. water and sanitation
reconstruction program in Iraq. Security conditions have led to project
delays and increased costs for security services. Management challenges
such as low initial cost estimates and delays in funding and awarding task
orders have also led to the reduced scope of the water and sanitation
program and delays in starting projects. In addition, U.S. agency and
contractor officials have cited difficulties in initially defining project
scope, schedule, and cost, as well as concerns with project execution, as
further impeding progress and increasing program costs. These difficulties
include lack of agreement among U.S. agencies, contractors, and Iraqi
authorities; high staffing turnover; an inflationary environment that
makes it difficult to submit accurate pricing; unanticipated project site
conditions; and uncertain ownership of project sites.
Poor Security Conditions Have Slowed Reconstruction and Increased Costs
According to agency officials and documentation, the ongoing insurgency in
Iraq has delayed the U.S. water and sanitation reconstruction program and
increased its cost. Attacks, threats, and intimidation against project
contractors and subcontractors have led to temporary project shutdowns and
disrupted the movement of materials and personnel to and from project
sites. The amount of work included in some projects has also decreased due
to the poor security conditions.
Although it is difficult to quantify the costs in time and money resulting
from poor security conditions, agency and contractor documents and
interviews with agency officials cite numerous security-related issues
that have resulted in delays in the design and execution of projects and
reduced scopes of work.17 For example:
o Security conditions have limited the ability of contractors to get to
project sites and perform site assessments, thus delaying project design.
At one project site in northern Iraq, for instance, the contractor
cancelled its assessment when its convoy came under attack.
17While it is apparent from these and other examples that security has
affected the progress of reconstruction, it is not always possible to
separate delays and cost increases caused by poor security conditions from
delays and cost increases caused by other factors. For example, USAID task
order amendments list the reasons why a job's schedule is being extended,
but several factors may be cited as part of the same extension request.
One project in southern Iraq received a 75-day extension due to delays in
awarding subcontracts and receiving permits from highway department,
issues with relocating illegal roadside markets, as well as deterioration
in the overall security situation.
o Work at a wastewater plant in central Iraq was halted for
approximately 2 months in early 2005 because insurgent threats drove
subcontractors away and made the work too hazardous to perform.
o Work was suspended at another sewer repair project in central Iraq
from early August to early November 2004, and PCO reported that a
sanitation project in central Iraq was halted for the entire month of
March 2005 due to poor security conditions.
o At the time of the Iraqi national election in January, project sites
in Iraq were shut down for at least 3 days.
o Iraqi employees and subcontractors working on water and sanitation
projects countrywide have been subject to hostility, violence, and
intimidation. At one project, a lead employee received a life-threatening
e-mail. The employee was subsequently chased by two armed men and fled the
country. The balance of the 12-member team refused to go back to the site
for some time. At another location in northern Iraq, a subcontractor
withdrew from the job site after receiving threats. It took nearly 2
months for a qualified replacement subcontractor to begin work.
o A wastewater plant project in central Iraq was subject to looting and
to attacks with improvised explosive devices. Iraqi employees sabotaged
this plant in November 2004 to protest U.S. operations in Fallujah by
walking off the job and leaving the plant running. The untended plant
stagnated, leading to damaged equipment and the need for a substantial
clean-up operation. As of July 2005, this plant remains closed.
o Insurgents have destroyed deliveries of needed materials to job sites.
At one water project in southern Iraq, death threats against key employees
have delayed construction and deliveries to the project site. The same
site was subjected to threats of violence and extortion attempts by local
tribesmen.
o USAID greatly reduced the scope of work for two pump station projects
due to security concerns and lack of site access permission from the Iraqi
ministry. In April 2005, the contractor reported that these projects would
be limited to design work, minor repairs, and delivery of equipment,
instead of the originally planned full construction. U.S officials stated
that Iraqi ministries would complete construction using materials provided
by the United States.
Poor security conditions also have increased the cost of providing
security services for contractors and sites. For example, when a project
is shut down or delayed due to security conditions, the fixed costs of
contractor camps and salaries continue to accrue even though contractors
in the field are unable to continue their work. USAID, PCO, and GAO have
each quantified some aspect of increased security requirements affecting
reconstruction costs; however, none has quantified a cost estimate for the
water sector as a whole. The USAID Inspector General found that costs for
security subcontractors as a percentage of the costs for USAID's
reconstruction effort in multiple sectors went from 4.2 percent of
contractor billings between March 2003 and February 2004 to 22.3 percent
between March and December 2004. Based on an analysis of a sample of water
projects, PCO estimated that the deteriorated security environment added
about 7 percent to project costs in the water sector. We have also
analyzed the security expenses of multiple reconstruction contracts and
found that 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 analyzed.18
Management Challenges Have Adversely Affected Project Implementation
Underestimated Costs and Funding Delays
Several management challenges in executing water and sanitation projects
have resulted in reduced scopes of work, project delays, and increased
costs. Factors affecting the scope and pace of reconstruction have
included understated initial cost estimates and delays in receiving
allocated funding and awarding task orders. U.S. agencies and contractors
have also faced difficulties in completing scopes of work, finalizing
associated costs, and executing projects in an unpredictable environment.
These difficulties include lack of agreement among U.S. agencies,
contractors, and Iraqi authorities; staff turnover; an inflationary
environment that makes it difficult to submit accurate pricing;
unanticipated project site conditions; and uncertain ownership of project
sites.
According to PCO, initial assessments prepared by the CPA underestimated
project costs and contributed to reductions in the scope of U.S.
reconstruction efforts. These initial assessments gave rough budget
estimates for repairing or constructing water and sanitation facilities
and, according to PCO, assumed more benign operating conditions. The CPA
18GAO, Rebuilding Iraq: Actions Needed to Improve Use of Private Security
Providers, GAO-05-737 (Washington, D.C.: July 28, 2005).
Challenges in Finalizing Work Terms and Costs and Executing Projects
relied on these estimates in putting together its proposed list of 137
projects to be executed with the original fiscal year 2004 IRRF allocation
of $4.33 billion. Because the estimates were low, the $4.33 billion
allocation was never sufficient to complete the original CPA list of
projects. According to a senior PCO official, these estimates were usually
very low in comparison to the estimates that contractors developed after
more thorough field assessments of project sites. In general, PCO found
these initial estimates to be 25 to 50 percent below actual costs.
According to a PCO water sector official, the low estimates meant that the
PCO construction program was underfunded from the start.
Contractors and agency officials cited delays in receiving funding as
challenges to awarding and completing task orders and staying within
budgets. PCO reported that the receipt of fiscal year 2005 funding for the
sector was delayed by at least 3 months, affecting its ability to award
projects in a timely manner. In addition, according to a PCO official, as
of June 2005, PCO had not yet received the apportionment for two task
orders awarded in January 2005. These task orders are not only delayed and
limited in the amount of work that can be done, but they are still
accruing overhead costs that may put the projects over budget. One
contractor stated that increased overhead costs resulted from delays in
receiving task orders from the government immediately after contract award
and again following the June 2004 dissolution of the CPA. PCO contractors
WGI/B&V and FluorAMEC stated that they began mobilizing staff after
receiving their contracts in March 2004 based on the expectation that they
would receive close to their maximum contract awards totaling $1.7
billion.19 As of June 2005, PCO had obligated about $873 million in task
orders to these contractors.20 Because of the lower amount of funding,
mobilized staff who were no longer needed were withdrawn from Iraq.
Following the award of task orders, PCO projects have been subject to
delays in the process of developing a final cost, schedule, and scope of
work, a process called definitization, and in overall project execution.
For 18 of the 24 PCO task orders, the time from initial issuance of a task
order to definitization has ranged from 6 to 10 months, with the scope of
one task issued in June 2004 for work in Al Anbar province still not
finalized as of June 2005. The Federal Acquisition Regulation states that
the process
19The three PCO contracts had ceiling values of $500 million, $600
million, and $600 million.
20This figure includes obligations from appropriated funds and from the
DFI.
should be completed within 6 months of signing the contract, or before
completion of 40 percent of the work to be performed, although a
contracting officer may extend this time in extreme cases and according to
agency procedures.21 Without a definitized task order, DOD may generally
obligate only up to 50 percent of the project's negotiated overall ceiling
price.22 PCO has made some funds available to its contractors prior to
definitization, enabling limited efforts such as planning and defining the
scope of work. However, if the definitization process does not keep pace
with the cost of these preliminary efforts, a project may come to a halt
once these limited funds are exhausted. Agency and contractor officials
cited the following factors as affecting both the definitization process
and the overall pace and cost of the U.S. water and sanitation
reconstruction effort:
o Lack of agreement between U.S. agencies and Iraqi authorities: Agency
and contractor officials and reports have cited difficulty in getting
agreement among Iraqi authorities, U.S. agencies, and contractors on
scopes of work and construction details. For example, at one site, Iraqi
officials wanted to repair a water treatment plant whereas the U.S. agency
had planned to replace it. At another site, local authorities disagreed
with the pipe specified for a particular project. Another project was
delayed when local Iraqi officials insisted on using brick instead of
concrete block for construction. At a wastewater project, local officials
wanted a certain type of sewer design that increased the project's cost.
In addition, U.S. agencies and Iraqi staff have had to overcome security
and communication constraints to coordinate agreement on the scope of
work. For example, one PCO official stated that only half of the Iraqis
invited to a scheduled project meeting were able to attend-the others were
absent due to the danger of traveling, being stopped in traffic, or for
other reasons.
o Frequent Staff Turnover: One PCO contractor cited discontinuity in key
U.S. government contacts, such as new contracting officers rotating in and
out of Iraq, as disrupting both cost and schedule. New
21Federal Acquisition Regulations 16.603-2. To meet urgent operational
needs, as is the case in Iraq's reconstruction, agencies may authorize
contractors to begin work before contracts or task orders have been
definitized-that is, before key terms and conditions, including price,
have been defined and agreed upon. While this approach allows agencies to
initiate work quickly, it also can result in potentially significant
additional costs and risks for the government.
22See 10 U.S.C. S: 2326; Defense Federal Acquisition Regulations
Supplement subpart 217.74.
contracting officers had to be brought up to speed on work and issues and
would sometimes ask the contractor to resubmit information in formats
different from those previously required. A PCO official agreed that
turnover in contract staff impacted project progress, and another noted
that the contracting office in Iraq lacked sufficient staff and equipment,
including computers, contract-writing software, and filing cabinets. This
official also noted that some of the staff assigned as contracting
officers lacked experience with the type of projects PCO awarded.
o Unpredictable costs: According to PCO officials, inflation in Iraq has
led to a situation where local labor and materials are in high demand and
short supply. Contractors have stated that the number of qualified Iraqi
contractors capable of undertaking some reconstruction work is limited.
Additionally, PCO officials noted that inflation in the cost of labor and
basic materials such as concrete and pipe had raised projected project
costs. For example, a U.S. contractor cited increases in the cost of
camps, transportation, and specialized labor such as experts in unexploded
ordnance investigation and disposal. The contractor expected costs to
increase because the demand for these specialized services likely exceeded
the supply.
o Poor site conditions: Contractors found some project sites inadequate
or unusable. For example, one proposed site in northern Iraq for a new
water treatment plant was flooded as a result of a break in a nearby
irrigation dike. The project was delayed while the site was drained. One
contractor had to redesign a proposed project when it found newly
constructed houses and a school near the proposed project's right of way.
Contractors also encountered unanticipated sewer blockages and additional
treatment equipment requiring repair.
o Unclear site ownership: Unclear ownership has delayed projects. In
some cases, Iraqi ministries have proposed sites where contractors
subsequently found squatters with competing property claims. In these
situations, U.S. contractors halted work until the ministry could provide
a usable site. For example, a water treatment plant in central Iraq was
delayed until a junkyard and squatters were removed. In southern Iraq in
March 2005, a PCO contractor was working to relocate families living in
water pump stations. A landfill project in central Iraq encountered site
selection difficulties stemming from both unclear land ownership and
environmental concerns. Two proposed sites had ownership issues, and the
third proposed site was environmentally infeasible due to a high
groundwater level. USAID cancelled the project, estimated to cost $20
million if completed, as a result of these
Iraq's Lack of Capacity to Operate and Maintain U.S.-Funded Projects Led to
Inoperable Facilities and Greater U.S. Focus on Improving Project
Sustainability
site issues. In all, about $4.1 million was budgeted for this project as
of June 2005. These funds include costs to design the landfill for the
ultimately unusable site, but were also used for equipment that will be
stored and used at other projects.
As of June 2005, U.S.-funded water and sanitation projects representing
about $52 million of the approximately $200 million in completed projects
were either not operating or were operating at lower capacity. In late
August 2004, U.S. contractors and agencies identified several areas in
which Iraqi capacity to maintain and operate reconstructed facilities
needed improvement. U.S. concerns included problems with staffing,
unreliable power to run treatment plants, insufficient spare parts, and
poor operations and maintenance procedures. In late March 2005, State
allocated $25 million for up to 1 year of additional on site operations
assistance and supply procurement at USAID's completed projects. In
addition, U.S. agencies have begun risk forecasting and interagency
planning efforts to address current and potential problem areas. However,
the large-scale construction projects yet to be completed remain at risk
due to staff and resource shortages.
Completed Projects Lack the Resources to Operate at Intended Capacity
As of June 2005, USAID's contractor Bechtel had completed approximately
$200 million in projects under its two contracts; however, projects
costing about $52 million could not be commissioned or their capacity had
been diminished due to the theft of key equipment, inadequate Iraqi staff,
or inadequate supplies of electricity and treatment chemicals. For
example, one wastewater plant repaired at a cost of $5.8 million was
partially shut down due to the theft of key electrical equipment from the
plant. Two wastewater treatment plants costing about $11 million lacked
reliable supplies of electricity and diesel fuel for generators. These two
plants had lacked these supplies since December 2004. An additional two
wastewater plants, for which about $24 million had been obligated, lacked
adequate Iraqi staff to function continuously or had inadequate supplies
of reliable electricity. Finally, all the water plants repaired in one
southern Iraq governorate lacked the water treatment chemicals and
supplies needed for proper operation. The United States obligated $10.4
million for repairs to these plants in southern Iraq.
U.S. Agencies Included The United States incorporated training programs
and capacity
Training and Capacity development into its reconstruction program
beginning in 2003. USAID's
Development Phase I reconstruction contract required Bechtel to involve
government ministries in implementing reconstruction projects and to
provide
Requirements in Contracts technical assistance and training to build Iraqi
capacity. In addition, PCO
and Identified contract provisions require WGI/B&V and FluorAMEC to
provide
Sustainability Issues operations and maintenance training and manuals and
be available for additional support for 90 days following project
completion. PCO also awarded two task orders that more explicitly include
capacity development efforts. In July 2004, PCO awarded a task order for
water conservation and network repair to address the numerous leaks in
Iraq's water mains. As part of this effort, the contractor is surveying
training needs, providing on-the-job and classroom training to Iraqi
ministry staff, and improving management tools and systems. In January
2005, PCO awarded another task order to provide systems development,
professional mentoring, and technical training to the Iraqi Ministry of
Municipalities and Public Works in eight governorates.
Bechtel began to report concerns about institutional strengthening in Iraq
beginning in August 2004 and provided a detailed assessment of the issue
in December 2004. In August 2004, Bechtel noted to USAID that the
sustainability of water projects was a critical concern in its
reconstruction efforts. In December 2004, Bechtel submitted a paper to
USAID that provided detailed information on areas it considered crucial to
ensuring the sustainability of water and sanitation projects being
completed under its Phase I contract. These include:
o Staffing: Bechtel estimated that water and wastewater plants had only
about one third of the staff needed. These plants lacked the staff to
operate 24 hours per day and were shut down at night. Day staff included a
significant number of temporary employees and "day laborers."
o Lack of electrical power and diesel fuel: The unreliable Iraqi
electrical grid required some plants to run on backup generators. However,
generators needed diesel fuel to power them, and the fuel was not always
available.
o Spare parts: Bechtel's Phase I contract with USAID did not provide
funding for spare parts for rehabilitated plants. Without these spares or
the funds to buy them, Iraqi staff would likely have to cannibalize parts
of the facility, borrowing parts from one machine to repair others.
o Poor operating practices: Equipment was not being operated or
maintained correctly. For example, filters were not cleaned, and chlorine
and alum dosing equipment was available but not used.
o Lack of maintenance programs: Iraqi staff did not undertake repairs
until a situation became critical. One facility, a key pumping station for
a city in southern Iraq, had to be taken completely offline to allow for
repairs.
In early 2005, a working group of State, USAID, PCO, and U.S. Army Corps
of Engineers officials assessed operations and maintenance problems in the
water sector. According to the group, much of the Iraqi workforce was
comprised of day laborers with little operations capability, and
operations managers were often political appointees with little or no
water sector experience. According to the working group's assessment, most
water and sewage treatment plants were the joint responsibility of the
Ministry of Municipalities and Public Works and the local municipalities
or governorates, which complicated the division of responsibility for the
plants. Further, procurement and supply issues led to severe capacity
limitations due to shortages of electricity, diesel fuel, and chemical
supplies.
U.S Agencies Have Increased Efforts to Support Iraqi Operations and
Management, but Future Sustainability Is Unclear
In response to problems with completed water and sanitation projects, U.S.
agencies undertook efforts to provide additional support for Iraqi
operations and management. First, State increased funds to support the
operation of water and sanitation facilities after their turnover to Iraqi
authorities. In late March 2005, nearly 7 months after the initial USAID
contractor report of sustainability concerns, State reallocated funding
from an electrical generation project and provided $25 million to USAID to
support the operations, maintenance, and logistics at USAID's recently
completed water and sanitation projects for up to 1 year. According to
USAID, Bechtel will hire local Iraqi companies to provide these services.
In proposing the reallocation, the U.S. embassy in Iraq noted that it was
moving from the previous model of building projects and turning them over
to Iraqi management toward a "build-train-turnover" system to protect the
U.S. investment in Iraq's infrastructure. State has not committed funds
for similar support at other USAID and PCO water and sanitation projects.
Second, in March 2005, PCO provided $10.3 million to CH2M Hill/PWI for a
capacity development initiative, a 12-month effort in eight governorates
that will include workshops, courses, and hands-on training. Areas
addressed will include baseline service assessments, operations and
maintenance planning and budgeting, project management, planning and
design, finance and administration, water quality, and communications. The
initiative also requires CH2M Hill/PWI to work with Iraqi ministry staff
on management efforts such as strategic planning, facility design
processes and standards, and international donor coordination.
Third, in April 2005, PCO began using a formal risk matrix to evaluate the
potential risk of failure for strategic and high-cost projects after their
handover to Iraqi management and to direct support to where it is needed.
Prior to project completion, PCO's sector contractors will assess five
factors and calculate a score that estimates the probability a
reconstruction project will not function as intended. Two of the five
factors are the quality of PCO's construction activities and the
completion of PCO's required operations and maintenance training and
documentation. PCO officials consider these factors to be under their
direct influence and therefore the least susceptible to failure. According
to PCO officials, the remaining three factors present the greater risks:
(1) the ability and commitment of Iraqi facility operators and management
to perform required operations and maintenance procedures, (2) management
support of operations and maintenance efforts, and (3) adequate funding
and direction from Iraqi ministries. PCO has not set a threshold score
whereby a high risk factor would delay the handover.
Finally, in May 2005, State/IRMO, USAID, PCO, and the U.S. Army Corps of
Engineers formed an interagency working group to identify ways of
addressing Iraq's capacity development needs. The working group is in its
early stages, and it is unknown what direction their recommendations may
take. PCO has identified potential future steps: (1) provide a year of
additional operations and maintenance support similar to what USAID will
provide for its Phase I projects, (2) expand its training effort with the
Iraqi Ministry of Municipalities and Public Works to all Iraqi
governorates, and (3) extend the capacity development initiative beyond
the 12 months currently planned.
Despite these efforts, the long-term outlook for sustaining reconstructed
Iraqi facilities remains unclear. USAID's $25 million program provides
initial support for capacity development, but many of these efforts are in
their early stages. In addition, facilities at risk of failure could still
be handed over to Iraqi management. The initial U.S. experience with
projects completed under USAID's Phase I contract and PCO's risk
assessment have shown that Iraqi ministry capacity remains an obstacle to
program success. U.S. agencies have obligated about $1.2 billion in U.S.
appropriated funds for projects they expect to complete between mid-2005
Conclusion
Recommendations for Executive Action
and 2008. These projects will require more trained staff, skilled
managers, spare parts, and supplies to function effectively.
The United States has obligated about $1.8 billion in appropriated funds
to restore Iraq's water and sanitation infrastructure and has made some
progress in a challenging security environment. However, it is difficult
to determine the overall progress and impact of U.S. efforts because of
limited performance data and measurements. These limited performance data
and measurements in turn make it difficult to assess the effectiveness of
U.S. water and sanitation reconstruction efforts. State has primarily
reported on the numbers of projects completed and the expected capacity of
reconstructed treatment plants. However, these data do not provide
information on the scope and cost of individual projects nor do they
indicate how much clean water is reaching intended users as a result of
these projects. Information on access to water and its quality is
difficult to obtain in an insecure environment and without water metering
facilities. However, opinion surveys assessing Iraqis' access and
satisfaction with water and sanitation services have the potential for
providing important data to measure the impact of U.S. reconstruction
efforts. Moreover, the United States has funded most water and sanitation
reconstruction assistance in Iraq to date. As a result, progress and
benefits measured through the use of surveys and other data collection
methods are more easily attributed to U.S. efforts.
Iraqis have been unable to operate and maintain U.S.-funded water and
sanitation facilities due to a lack of reliable power, trained Iraqi
staff, and required chemicals and supplies. In response, U.S. agencies
have taken initial steps to improve Iraqi capacity to operate and maintain
water and sanitation facilities. However, these efforts are just
beginning. It is unclear whether the Iraqis will be able to maintain and
operate both completed projects and projects expected to be completed
through 2008 for which the U.S. has obligated more than a billion dollars.
Without assurance that Iraqis have adequate resources to maintain and
operate completed projects, the U.S. water and sanitation reconstruction
program risks expending program funds on projects with limited long-term
impact.
To more accurately report the results of U.S. reconstruction efforts in
water and sanitation, we recommend that the Secretary of State establish
indicators and measures to assess how the U.S. efforts are improving the
quality and quantity of water and sanitation services in Iraq. For
example, State could include information on project scope and cost in its
reporting
Agency Comments
on numbers of projects under way and completed. State could also include
surveys that measure Iraqis' access to water and sanitation facilities and
their satisfaction with these services in selected geographic areas that
are served by larger-scale U.S. reconstruction efforts. Efforts to develop
performance measures should take into account the challenges in collecting
data in a difficult security environment.
To help ensure that projects funded by U.S. appropriations operate at
their intended capacity and provide benefits to the Iraqi people after
their completion, we recommend that the Secretary of State work with Iraqi
ministries to assess the resources needed to operate and maintain new and
repaired water and sanitation facilities before they are turned over to
Iraqi management and, afterwards, work with the Iraqi government to ensure
that Iraq has these resources.
We provided a draft of this report to the Departments of Defense and State
and the U.S. Agency for International Development.
The Department of State provided written comments, which are reprinted in
appendix II. State agreed with our recommendations and stated that it is
refining its performance metrics and working with the Iraqi government to
assess the resources needed to sustain water and sanitation facilities.
State also endorsed our main findings and provided additional comments to
elaborate on its water and sanitation efforts in Iraq. State also provided
technical comments, which we incorporated where appropriate.
The U.S. Agency for International Development also provided a written
response, which is reprinted in appendix III. The agency stated that it is
pleased that the report prominently mentions the importance of operations
and maintenance in the water sector. USAID added that the report
contributes to the discussion of next steps in Iraq reconstruction by
clarifying the economic and social context of the management of public
utilities in Iraq.
The Department of Defense did not provide written comments on our report;
however, it provided technical comments, which we incorporated where
appropriate.
We are sending copies of this report to interested congressional
committees. We will also make copies available to others on request. In
addition, this report is available on GAO's Web site at
http://www.gao.gov.
If you or your staff have any questions, please contact me at (202)
512-8979
or [email protected]. Contact points for our Offices of Congressional
Relations and Public Affairs may be found on the last page of this report.
Key contributors to this report are listed in appendix IV.
Joseph A. Christoff
Director, International Affairs and Trade
List of Committees
The Honorable Thad Cochran
Chairman
The Honorable Robert C. Byrd
Ranking Minority Member
Committee on Appropriations
United States Senate
The Honorable Mitch McConnell
Chairman
The Honorable Patrick J. Leahy
Ranking Minority Member
Subcommittee on State, Foreign Operations,
and Related Programs
Committee on Appropriations
United States Senate
The Honorable Ted Stevens
Chairman
The Honorable Daniel K. Inouye
Ranking Minority Member
Subcommittee on Defense
Committee on Appropriations
United States Senate
The Honorable John Warner
Chairman
The Honorable Carl Levin
Ranking Minority Member
Committee on Armed Services
United States Senate
The Honorable Richard G. Lugar
Chairman
The Honorable Joseph R. Biden, Jr.
Ranking Minority Member
Committee on Foreign Relations
United States Senate
The Honorable Susan M. Collins
Chairman
The Honorable Joseph I. Lieberman
Ranking Minority Member
Committee on Homeland Security
and Governmental Affairs
United States Senate
The Honorable C. W. Bill Young
Chairman
The Honorable John P. Murtha
Ranking Minority Member
Subcommittee on Defense
Committee on Appropriations
House of Representatives
The Honorable Jim Kolbe
Chairman
The Honorable Nita M. Lowey
Ranking Minority Member
Subcommittee on Foreign Operations,
Export Financing, and Related Programs
Committee on Appropriations
House of Representatives
The Honorable Duncan L. Hunter
Chairman
The Honorable Ike Skelton
Ranking Minority Member
Committee on Armed Services
House of Representatives
The Honorable Tom Davis
Chairman
The Honorable Henry A. Waxman
Ranking Minority Member
Committee on Government Reform
House of Representatives
The Honorable Christopher Shays
Chairman
Subcommittee on National Security,
Emerging Threats, and International Relations
Committee on Government Reform
House of Representatives
The Honorable Henry J. Hyde
Chairman
The Honorable Tom Lantos
Ranking Minority Member
Committee on International Relations
House of Representatives
Appendix I: Objectives, Scope & Methodology
As part of GAO's review of reconstruction efforts in Iraq initiated under
the Comptroller General's authority, we examined U.S. activities directed
at rebuilding the water and sanitation sector. Specifically, we assessed
(1) the funding and status of U.S. activities, (2) U.S. efforts to measure
progress, (3) the factors affecting the implementation of reconstruction
activities, and (4) the sustainability of U.S.-funded projects. To
accomplish our objectives, we relied primarily on U.S. agency and
contractor reporting. We also met with agency and contractor officials in
the United States. Although we did not travel to Iraq, we interviewed U.S.
officials based in Iraq by telephone, exchanged information through email,
and met with contractor officials in the United States who had spent time
in Iraq. We also reviewed U.S. government-funded surveys that document
Iraqi perceptions of the quality and quantity of water and sanitation
services.
In assessing resources supporting the reconstruction of Iraq, we focused
on the sources and uses of U.S., Iraqi, and international funding. U.S.
agencies provided us with electronic data files for appropriated funds,
the Development Fund for Iraq (DFI), vested assets, and seized assets.
These files generally included objective or project descriptions with
allocated, obligated, and disbursed amounts. We assigned each of the
funding line items to broad categories based on the descriptive
information available in the data files. To assign the data to a category,
we relied on project descriptions from agency data files.
In addressing the amount of U.S. funds that have been appropriated,
obligated, and disbursed for the Iraq reconstruction effort, we collected
funding information from contractors, the Department of Defense (DOD),
including the Project and Contracting Office (PCO); Department of State;
and the U.S. Agency for International Development (USAID). Data for U.S.
appropriated funds are as of end June 2005. We also reviewed Special
Inspector General for Iraq Reconstruction reports, and Office of
Management and Budget documents. Although we have not audited the funding
data and are not expressing our opinion on them, we discussed the sources
and limitations of the data with the appropriate officials and checked
them, when possible, with other information sources. We determined that
the data were sufficiently reliable for characterizing water and
sanitation projects. To address international assistance for rebuilding
Iraq, we collected and analyzed information provided by the State
Department's Bureau of Economic and Business Affairs. We also collected
and reviewed reporting documents from the International Reconstruction
Fund Facility for Iraq (IRFFI). To assess the reliability of the data on
the pledges, commitments, and deposits made by international donors, we
interviewed officials at State who are responsible for monitoring data
Appendix I: Objectives, Scope & Methodology
provided by the IRFFI and donor nations. We determined that the data on
donor commitments and deposits made to the IRFFI were sufficiently
reliable for the purposes of reporting at the aggregate level.
To determine the status of U.S. activities in the water and sanitation
sector, we reviewed documents obtained from the former CPA, the State
Department, PCO, USAID, and agency contractors. Specifically, we reviewed
contracts, task orders, status reports, and planning documents prepared by
USAID, the former CPA, State, PCO, and contractors. We also interviewed
USAID, State, and PCO officials and their contractor representatives. We
focused on the five major USAID and PCO contracts for water and sanitation
implemented by U.S. contractors because they received the majority of U.S.
appropriated funds. We report progress data as of the end of June 2005.
Funding data for the major contracts has been reported as of the end of
March for USAID contracts and end of June for PCO contracts.
To assess U.S. efforts to measure progress we reviewed planning documents
from the CPA and State, and agency reporting documents from PCO, USAID,
and State. We also contacted agency officials for clarification of some of
this data and further information in evaluating its effectiveness in
determining the impact of the U.S. program. We reviewed the methodology of
the Iraq Quality of Life Survey and contacted contractor officials to
review the methodology and survey limitations. The USAID contractor did
not conduct cross-checks for the internal consistency of responses on
water supply, but the satisfaction data reported in the survey are
analogous to the findings on access reported in the earlier UN/World Bank
and USAID/Bechtel assessments. We determined that the survey data was
sufficiently reliable to report in the quartile bands used in this report.
To determine the factors affecting the implementation of reconstruction
activities, we reviewed contractor and agency reporting and interviewed
agency officials in the United States and Iraq. Specifically, we reviewed
agency and contractor reports, and we interviewed USAID, State, and PCO
officials and contractor representatives in the United States and in Iraq.
We reviewed the data for discrepancies, interviewed officials familiar
with the data collection, and determined that the information from these
sources was sufficiently reliable to meet our reporting objectives.
To determine the sustainability of U.S.-funded projects, we reviewed
agency contracts, contractor reporting, and agency reporting.
Specifically, we reviewed USAID, PCO, and contractor reports, and we
interviewed USAID, State, and PCO officials and contractor representatives
in the
Appendix I: Objectives, Scope & Methodology
United States and in Iraq. We determined that the information from these
sources was sufficiently corroborated and reliable to meet our reporting
objectives.
We conducted our review from September 2004 through August 2005 in
accordance with generally accepted government auditing standards.
Appendix II: Comments from the Department of State
Appendix II: Comments from the Department of State
Appendix II: Comments from the Department of State
Appendix III: Comments from the U.S.
Agency for International Development
Appendix IV: GAO Contact and Staff Acknowledgments
GAO Contact
Staff Acknowledgments
(320316)
Joseph A. Christoff, Director (202) 512-8979
John Hutton (Assistant Director), Monica Brym, Aniruddha Dasgupta, Charles
D. Groves, B. Patrick Hickey, Sarah Lynch, Michael Simon, and Audrey Solis
made key contributions to this report. Sharron Candon, Lynn Cothern,
Martin De Alteriis, Judy McCloskey, and Judith Williams provided technical
assistance.
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