Rebuilding Iraq--Status of DOD's Reconstruction Program 	 
(15-DEC-06, GAO-07-30R).					 
                                                                 
Of the $18.4 billion that Congress appropriated for Iraq relief  
and reconstruction in fiscal year 2004, the Department of Defense
(DOD) received the largest share--$13.5 billion. As of September 
30, 2006, DOD had obligated about $13.1 billion and disbursed	 
about $9.7 billion--$5.6 billion for construction, $3.6 billion  
for nonconstruction (e.g., engineering, procurement, and the	 
delivery of equipment), and about $480 million for related	 
overhead costs. Among the many contracts DOD uses in Iraq, DOD	 
has obligated about $3.7 billion for 12 large-scale,		 
multiple-year design-build contracts for major construction	 
projects. The design-build contracting approach makes one award  
for both the design and construction of a project, thus 	 
eliminating the need for a separate bidding process for the	 
construction phase. To help Congress monitor the current progress
and costs of DOD's reconstruction activities in Iraq, this report
discusses (1) the status of the current construction work and	 
targeted completion dates and (2) the support costs incurred by  
the design-build contractors in DOD's construction program.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-30R 					        
    ACCNO:   A64204						        
  TITLE:     Rebuilding Iraq--Status of DOD's Reconstruction Program  
     DATE:   12/15/2006 
  SUBJECT:   Construction contracts				 
	     Contract administration				 
	     Cost analysis					 
	     Defense cost control				 
	     Defense procurement				 
	     Department of Defense contractors			 
	     Financial analysis 				 
	     Financial records					 
	     Performance measures				 
	     Program evaluation 				 
	     Work measurement					 
	     Funds management					 
	     Appropriated funds 				 
	     Program goals or objectives			 
	     Iraq						 
	     Iraq Relief and Reconstruction Fund		 

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GAO-07-30R

   

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December 15, 2006

Congressional Committees

Subject: Rebuilding Iraq--Status of DOD's Reconstruction Program

Of the $18.4 billion that Congress appropriated for Iraq relief and
reconstruction in fiscal year 2004, the Department of Defense (DOD)
received the largest share-- $13.5 billion.^1 As of September 30, 2006,
DOD had obligated^2 about $13.1 billion and disbursed about $9.7
billion--$5.6 billion for construction, $3.6 billion for nonconstruction
(e.g., engineering, procurement, and the delivery of equipment), and about
$480 million for related overhead costs. Among the many contracts DOD uses
in Iraq, DOD has obligated about $3.7 billion for 12 large-scale,
multiple-year design-build contracts for major construction projects. The
design-build contracting approach makes one award for both the design and
construction of a project, thus eliminating the need for a separate
bidding process for the construction phase.

To help Congress monitor the current progress and costs of DOD's
reconstruction activities in Iraq, this report discusses (1) the status of
the current construction work and targeted completion dates and (2) the
support costs incurred by the design-build contractors in DOD's
construction program.

To identify the status of DOD's current construction work, we summarized
DOD's work-in-place metrics provided by the Army Corps of Engineers' Gulf
Region Division/Project and Contracting Office (GRD/PCO) in Iraq.^3 DOD
uses this metric to compare the value of completed and planned work for
its contractors, including the design-build contractors. This metric is a
rudimentary measure of earned value, a measure of total value against
individual contract amounts, including design and procurements made. The
work does not necessarily have to be "in place" or constructed.^4 To
identify the support costs^5 incurred by DOD's design-build contractors in
Iraq, we analyzed the financial data provided by the Joint Contracting
Command-Iraq/Afghanistan (JCC-I/A) for each design-build contractor. (See
app. 1 for details on our scope and methodology.) As part of our work, we
interviewed U.S. government personnel in the United States and Iraq and
traveled to Iraq in November 2005 and March 2006 to meet with U.S.
government officials overseeing DOD construction activities. We conducted
our review from November 2005 to December 2006 in accordance with
generally accepted government auditing standards. We prepared this report
under the Comptroller General's authority to conduct evaluations on his
own initiative for Congress.

^1These funds were appropriated to the Iraq Relief and Reconstruction Fund
in the Emergency Supplemental Appropriations Act for Defense and for the
Reconstruction of Iraq and Afghanistan, 2004, P. L. 108-106.

^2An obligation is a definite commitment that creates a legal liability of
the government for the payment of goods and services ordered or received.

^3DOD merged GRD and PCO in late 2005.

^4For the purposes of this report, DOD's planned work is defined as the
total construction value of its projects and generally includes design,
construction, award fee, security, life support, and administrative costs.

^5Support costs include transportation and mobilization, life support,
management, administration, and security.

Results in Brief

While financial data show that DOD has obligated most (97 percent) of its
$13.5 billion in fiscal year 2004 reconstruction funds, work-in-place data
show that about 29 percent, or $2.3 billion, of DOD's construction program
is incomplete, as of October 8, 2006. Continued congressional oversight of
these activities will be needed since DOD estimates that this work will
not be completed until mid- to late 2008. The incomplete work varies by
sector, with 10 percent of planned construction remaining in the security
and justice sector and 38 percent remaining in the communications and
transportation sector. Activities in the public works and water sector;
the buildings, education, and health sector; and the transportation and
communications sector will not be completed until mid- to late 2008.
Although the United States has generally not met its goals for
reconstruction activities in Iraq, DOD projects that its remaining
construction projects will enable Iraq to increase its production of oil,
electricity, and clean water and treated sewerage. As GAO's past work has
shown, the challenging security environment, persistent attacks on
U.S.-funded infrastructure projects, and sustainment challenges could make
it difficult for DOD to achieve this progress.^6

DOD's design-build contractors will incur estimated support costs of about
$1.2 billion or about 33 percent of projected completion costs of $3.7
billion. The support costs include estimated security costs of about
$359.6 million. In response to higher-than-anticipated support costs, DOD
officials have pursued alternative contracting strategies. For example,
DOD officials have contracted directly with Iraqi firms in the electricity
and transportation sectors rather than relying exclusively on U.S.
design-build contractors to complete the work. U.S. officials state that
the transition to direct contracting with local Iraqi and international
contractors could lead to cost reductions. Due to the lack of available
information on the costs of direct contracts, we were not able to
establish the extent to which support costs could be avoided at the time
of our review. The direct contracting approach also has the potential of
increasing Iraqi ownership of reconstruction efforts and employing more
local Iraqis.

The Department of Defense provided technical comments on our draft report
that we incorporated, where appropriate. In its comments, Defense stated
that it appreciated the balanced report that GAO has developed. Defense
also clarified that the work-in-place measure used in our report is a
rudimentary measure of earned value and measures total value against
individual contract amounts, including design and procurements made. The
measure does not only apply to work that is "in place" or constructed.

Background

From May 2003 through June 2004, the Coalition Provisional Authority
(CPA), led by the United States and the United Kingdom, was the United
Nations-recognized authority responsible for the temporary governance of
Iraq and for overseeing, directing, and coordinating the reconstruction
effort. The CPA used a multitiered contracting approach for Iraq
reconstruction activities. The CPA, through various military
organizations, awarded 1 lead contract, 6 sector contracts, and 12
design-build contracts in early 2004 (see fig. 1). Under this approach,
the CPA used one lead contract to provide overall coordination and
direction for the rebuilding program. Six sector contractors helped define
sector priorities and project requirements, and assisted DOD in managing
the 12 design-build contractors used to perform the on-the-ground
construction work.

^6GAO, Stabilizing Iraq: An Assessment of the Security Situation,
GAO-06-1094T (Washington, D.C.: Sept. 11, 2006); and Rebuilding Iraq:
Governance, Security, Reconstruction, and Financing Challenges,
GAO-06-697T (Washington, D.C.: Apr. 25, 2006).

Figure 1: DOD Construction Program Carried Out through a Multitiered
Contracting Approach

On June 28, 2004, the CPA transferred power to an interim sovereign Iraqi
government, the CPA was dissolved, and Iraq's transitional period began.
After the transfer, National Security Presidential Directive 36 (NSPD 36)
passed responsibility for the supervision and general direction of U.S.
reconstruction assistance in Iraq to the Secretary of State. The directive
also established a temporary organization within the department called the
Iraq Reconstruction Management Office to facilitate the transition in
Iraq. The Project and Contracting Office (PCO), a temporary organization
in the Department of Defense, was tasked under NSPD 36 with providing
acquisition and project management support. In late 2005, DOD merged PCO
with the Army Corps of Engineer's Gulf Region Division, which now
supervises DOD reconstruction activities in Iraq.

DOD Has Made Some Progress, but Significant Reconstruction Work Remains

Although DOD has made some progress in restoring Iraq's essential
services, it has not met program goals and estimates that it will not
complete the remainder of its work until mid- to late 2008. While
financial data show that DOD has obligated 97 percent of its $13.5 billion
fiscal year 2004 reconstruction funds, work-in-place data show that about
29 percent, or $2.3 billion, of DOD's planned construction activities
valued at $8 billion are incomplete, as of October 8, 2006. This metric
applies to DOD's Iraq construction activities using these funds and is not
exclusive to design-build contractors. Work-in-place data are a measure of
progress and compare completed to planned construction work. According to
DOD, the remaining work will enable Iraq to increase the production of
oil, electricity, clean water, and treated sewerage, among other outcomes.
However, the challenging security environment, persistent attacks on
U.S.-funded infrastructure projects, and sustainment challenges could make
it difficult for DOD to achieve this progress.

Of the $18.4 billion that Congress appropriated for Iraq relief and
reconstruction in fiscal year 2004, DOD received the largest share--$13.5
billion. As of September 30, 2006, DOD had obligated $13.1 billion--97
percent. DOD obligated $8.2 billion of these funds on construction
activities, including those of the design-build contractors; $4.4 billion
on nonconstruction items (e.g., engineering, procurement, and delivery of
equipment); and about $520 million in DOD-related overhead costs.

One way DOD measures progress is to use work-in-place data for its
construction contractors, including the design-build contractors. These
data are reported by the GRD/PCO to the Secretary of the Army every two
weeks. Work-in-place measures indicate that about 71 percent of all of
DOD's planned work has been completed as of October 8, 2006, including 90
percent in the security and justice sectors, 73 percent of the work in the
oil sector, and 64 percent of the work in the electricity sector (see
table 1).

Table 1: Comparison of Planned and Completed Work by Sector Using All DOD
Acquisition Strategies, as of October 8, 2006

Dollars in billions

Sector                      Planned work        Estimated        Completed 
                                                                              
                                               work-in-place work relative to 
                                                                              
                                            (completed work)     planned work 
                                                                    (percent) 
Security and justice               $1.46            $1.31               90 
Electricity                         3.00             1.92               64 
Oil infrastructure                  1.30             0.95               73 
Public works and water              1.36             0.93               69 
Buildings, education, and           0.50             0.36               72 
health                                                                     
Transportation and                  0.42             0.26               62 
communications                                                             
Total                              $8.04            $5.73               71 

Source: GRD/PCO.

Note: This measure includes DOD construction activities using Iraq relief
and reconstruction funds in these sectors and is not exclusive to
design-build contractor activities.

DOD reports that it has increased electricity generation, oil production,
and water treatment capacity, and built or renovated schools, hospitals,
border forts, post offices, and railway stations. Table 2 shows by sector
the planned completion dates and selected reconstruction goals for all DOD
reconstruction activity, including the design-build and all other
contracts.

Table 2: DOD Reconstruction Goals, Achievements, and Remaining Work,
Funded by Iraq Relief and Reconstruction Funds, as of October 2006

Sector                                      DOD goals  
                      Program product                     
(estimated                                     Program   Current Remaining 
completion date)                                target  achieved           
Security and       Border posts                    252       245         7 
justice^a          Points of entry                  13         9         4 
                      Military facilities             204       120        84 
(Dec. 2007)        Police facilities               398       348        50 
                      Fire facilities                  94        86         8 
                      Prisons/courts                   46        29        17 
                      Miscellaneous facilities         58        33        25 
Electricity        Contributed peak              1,879     1,420       459 
                      generation capacity                                     
(Dec. 2007)        (megawatts)                                             
                      Hours of power per day   10-12 Iraq 10.8 Iraq       N/A 
                      (U.S. goal)                     and   and 5.1           
                                                  Baghdad   Baghdad           
                      Transmission capacity         6,000     5,500       500 
                      (megawatts)                                             
                      Distribution substations         89        48        41 
Oil                Crude oil capacity                3       2.5       0.5 
                      (million barrels per                                    
(Apr. 2007)        day)                                                    
                      Natural gas production          800       600       200 
                                                                              
                      (million standard cubic                                 
                      feet per day)                                           
                      Liquefied petroleum gas       3,000     1,200     1,800 
                      (LPG) production                                        
                      capacity (tons per day)                                 
Public works and   Potable water (delivery       1,150       419       731 
water              capacity added)                                         
                                                                              
(July 2008)        (thousand cubic meters                                  
                      per day)                                                
                      Sewerage treatment               48         0        48 
                      capacity added (thousand                                
                      cubic meters per day)                                   
                      Repair dams, barrages,            2         1         1 
                      and canals (number                                      
                      repaired)                                               
                      Irrigated land                 387k       31k      356k 
                      (hectares)                                              
Buildings,         Government building               6         5         1 
education, and     projects                                                
health             Hospital projects/public   25/142/2    14/7/0  11/135/2 
                      health centers/other                                    
(July 2008)        significant health                                      
                      projects                                                
                      Schools built or                810       806         4 
                      renovated                                               
Transportation and Railway station                  99        85        14 
communications     renovations                                             
                      Port projects/aviation         7/19      4/13       3/6 
(Dec. 2008)        projects                                                
                      Village roads and               427       239       188 
                      expressways (kilometers)                                
                      Advanced first responder          3         3         0 
                      network projects^b                                      
                      Post offices/major             34/2      31/1       3/1 
                      communications                                          
                      institutions                                            

Source: GRD/PCO.

^aSecurity and justice sector targets and achievements include projects
completed by the Multi-National Security Transition Command--Iraq.

^bFor the purposes of analyzing work-in-place numbers, the Advanced First
Responder Network was included in the communications sector. The network
is also sometimes considered to be a part of the security and justice
sector.

DOD estimates, however, that the remaining 29 percent of the planned work
will not be completed until mid- to late 2008. According to DOD, this
remaining work will enable Iraq to increase the production of oil,
electricity, clean water, and treated sewerage by

           o adding 459 megawatts of peak generation capacity, 500 megawatts
           of transmission capacity, and building 41 distribution substations
           in the electricity sector;^7

           o increasing crude oil production capacity by 0.5 million barrels
           per day and increasing petroleum gas production by 1,800 tons per
           day; and

           o adding an additional 731,000 cubic meters of potable water
           delivery capacity per day, and 48,000 cubic meters of sewage
           treatment capacity per day, and 356,000 hectares of irrigated
           land.

However, the metrics used to report progress make it difficult to
determine the impact of the U.S. reconstruction effort. For example, we
reported previously that in the water resources and sanitation sector,
little was known about how U.S. efforts were improving the amount and
quality of water reaching Iraqi households or their access to the
sanitation services.^8 Reported output measures overestimated the amount
of potable water reaching Iraqi households because U.S. officials estimate
that 60 percent of water treatment output is lost due to leakage,
contamination, and illegal connections.

The U.S. mission in Iraq reported in December 2005 that it had developed a
set of metrics to better estimate the potential impact that U.S. water and
sanitation reconstruction efforts were having on Iraqi households.
However, it acknowledges that it is difficult to measure how much water
the Iraqis actually receive or whether the water is potable. The mission
report notes that, without such comprehensive data, mission efforts to
accurately assess the impact of U.S. reconstruction efforts on water and
sanitation services are limited.

In addition, overall security conditions in Iraq have deteriorated since
June 2003, as evidenced by attack trends, growing sectarian violence, and
the growth and influence of militias. Enemy-initiated attacks against the
coalition, its Iraqi partners, and infrastructure have continued to
increase over time, complicating efforts to rebuild and restore essential
services. Overall, attacks increased by 23 percent from 2004 to 2005.
After declining in the fall of 2005, the number of attacks rose to the
highest level ever in July 2006 (see fig. 2).^9

7In providing technical comments on the report, DOD stated that over 1,000
megawatts will be sustained by various projects in its generation program.

^8GAO, Rebuilding Iraq: U.S. Water and Sanitation Efforts Need Improved
Measures for Assessing Impact and Sustained Resources for Maintaining
Facilities, GAO-05-872 (Washington, D.C.: Sept. 7, 2005).

^9GAO, Stabilizing Iraq: An Assessment of the Security Situation, 
GAO-06-1094T (Washington, D.C.: Sept. 11, 2006).  The attack data we used
provide the best overall assessment of Iraq's precarious security
environment and the ensuing challenges in completing reconstruction
projects. GAO has requested, but has yet to receive, unclassified attack
data for September through November 2006.

Figure 2: Enemy-Initiated Attacks against the Coalition and Its Iraqi
Partners, May 2003 through August 2006

In July 2006, the State Department reported to Congress that the recent
upturn in violence had hindered efforts to engage fully with Iraqi
partners and noted that a baseline of security was a prerequisite for
moving forward on the political and economic tasks essential to achieving
the conditions to withdraw U.S. forces. Unstable security conditions will
make it more difficult for DOD to achieve its planned construction goals
and targets.

DOD's Design-Build Contractors in Iraq Will Incur Support Costs of about
33 Percent

Our analysis shows that DOD's design-build contractors will incur support
costs of about $1.2 billion, or about 33 percent of projected completion
costs of $3.7 billion. According to agency officials, the design-build
contracting model used in Iraq entailed costs such as mobilizing, feeding,
housing, and protecting an expatriate workforce. These officials further
stated that these costs are typically incurred on most large-scale
international construction projects but were higher due, in part, to the
poor security environment and the difficulties in managing contract costs
in Iraq. In response to higher-than-anticipated support costs, DOD
officials have pursued alternative contracting strategies. For example,
DOD officials have contracted directly with Iraqi firms in the electricity
and transportation sectors rather than relying exclusively on U.S.
design-build contractors to complete the work.

DOD's design-build contractors will incur estimated support costs of about
$1.2 billion, or about 33 percent of the projected completion costs of
$3.7 billion (see table 3).^10 These costs ranged from approximately 24
percent in the public works and water sector to about 67 percent in the
transportation sector. In the transportation sector, the design-build
contractor demobilized and left Iraq shortly after award of the contract
in March 2004 because DOD and the contractor mutually agreed that the
overall program costs were too high. As a result, the majority of
design-build costs for the transportation sector accrued by the U.S. were
support costs accumulated during the contractor's brief stay in-country.

^10In addition to these design-build contractor support costs, the PCO,
lead contractor, and sector contractors incurred additional costs of $443
million for fiscal years 2004 through 2006 in managing the activities of
the design-build contractors in Iraq.

Table 3: Comparison of Design-Build Contractors' Support Costs by Sector,
as of October 2006

Dollars in millions

Sector               Design-build   Support    Support Security   Security 
                                        costs, costs as a          costs as a 
                        contractors' including               costs            
                           estimated           percentage     only percentage 
                          completion  security         of                  of 
                               costs     costs                      estimated 
                                                estimated                     
                                                                   completion 
                                               completion               costs 
                                                    costs                     
Security/justice           $343.4    $ 97.8       28.5   $ 29.6        8.6 
Electricity                 732.1     259.9       35.5    105.4       14.4 
Oil                       1,201.3     467.4       38.9    113.8        9.5 
infrastructure                                                             
Water resources             852.8     207.8       24.4     59.2        6.9 
Building, health,           369.2     124.6       33.7     27.6        7.5 
and education                                                              
Communications              158.1      46.6       29.5     20.6       13.0 
Transportation               17.6      11.8       67.5      3.4       19.4 
Total                    $3,674.5  $1,215.9       33.1   $359.6        9.8 

Sources: JCC-I/A and design-build contractors.

Note: Support costs generally include transportation and mobilization,
life support, management, administration, and security.

Officials in the electricity and oil sectors encountered challenges
controlling support costs stemming from the level of contractors'
reconstruction efforts. In the electricity sector, high cost estimates by
one design-build contractor resulted in the termination of five task
orders and the resolicitation of that work. After the task orders were
canceled, the design-builder was slow to reduce overhead costs in
accordance with the reduced workload, according to agency officials and
documents. In the oil sector, DOD officials required the two design-build
contractors to reorganize their management structure and improve their
cost reporting as a result of concerns regarding high costs.^11

DOD also estimates that, across all sectors, the design-build contractors
will incur security costs of about $360 million, or about 9.8 percent of
estimated completion costs of $3.7 billion, during their reconstruction
activities in Iraq. According to U.S. officials, the large number of
project sites in remote locations and increased attacks on infrastructure
have contributed to increased security costs.

The security costs we identified are lower than those reported to Congress
by the Department of State in January 2006. State reported in its January
2006 quarterly update to Congress that security remains a critical concern
to the reconstruction effort in Iraq. State's analysis indicated that
direct and indirect security costs represent 16 percent to 22 percent of
the overall cost of major infrastructure construction projects in Iraq.
According to the report, these costs included the reprogramming of Iraq
Relief and Reconstruction Fund money to the security sector and to cover
those costs stemming from schedule delays and

^11To increase transparency over support costs, the oil sector developed
four administrative task orders that allowed the design-build contractors
to more easily report on transportation and mobilization, management and
administration, security, and life support costs.

increased maintenance costs. The estimated security costs we identified
are unique to the design-build contractors and do not include other
broader security costs included in State's analysis.

In response to higher than anticipated support costs, DOD officials have
contracted directly with Iraqi firms in the electricity and
transportation, among other sectors, rather than relying exclusively on
the design-build contractors to complete the work. For example, in the
electricity sector, DOD directly contracted with Iraqi firms to reduce the
costs of reconstruction efforts not requiring advanced technical and
management expertise, such as erecting electrical distribution projects.
DOD officials estimate that the department may achieve a cost savings of
20 percent to 50 percent in the electricity sector using direct
contracting rather than design-build contractors. In the transportation
sector, the design-build contractor demobilized and left Iraq shortly
after award of the contract in March 2004 because DOD and the contractor
mutually agreed that the overall program costs were too high. DOD then
made greater use of Iraqi contractors who were experienced in building
roads and bridges. However, due to the lack of available data on direct
contracts awarded by DOD, we were unable to determine the level of actual
cost avoidance achieved through these contracting efforts.

Agency Comments

We provided a draft of this report to the Department of Defense, which
provided technical comments that we incorporated, where appropriate.
Defense stated that it appreciated the balanced report that GAO has
developed. In its technical comments, the department also clarified that
the work-in-place measure used in our report is a rudimentary measure of
earned value and measures total value against individual contract amounts,
including design and procurements made. The measure does not only apply to
work that is "in place" or constructed as we stated in our draft report.

Scope and Methodology

To determine the construction work completed to date and targeted
completion dates for construction activities in Iraq, we reviewed
documents and obtained data from the Department of Defense (DOD),
including the Project and Contracting Office of the Gulf Region Division
(GRD/PCO). Data for U.S. appropriated funds and work-in-place are as of
September 30, 2006, and October 8, 2006, respectively. We also reviewed
Special Inspector General for Iraq Reconstruction and other audit agency
reports. Although we have not audited the funding and work-in-place 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, against other information sources. In March 2006, DOD
standardized the use of its work-in-place measures to serve as an
indicator of construction progress across all of Iraq's reconstruction
sectors. We determined that the data were sufficiently reliable for broad
comparisons in the aggregate using the category descriptions we have made.

To determine the support costs incurred by the design-build contractors in
DOD's construction program, we focused on design-build contractors'
efforts in the Iraqi security and justice; electricity; oil; water;
transportation and communications; and buildings, health and education
sectors. These costs include transportation and mobilization, life
support, management, administration, and security costs. We compared the
design-build contractor's projected support costs to their estimated
completion costs of $3.7 billion to estimate the level of support costs
that will be incurred by DOD's design-build contractors in Iraq. We also
used the Joint Contracting Command-Iraq/Afghanistan (JCC-I/A) data to
compare the security costs (one component of support costs) to estimated
completion costs to estimate the level of security costs that will be
incurred by the design-build contractors. Specifically, we focused on the
costs incurred by design-build contractors participating in the
construction program and how sectors have adapted to meet these support
costs. We obtained support costs information directly from the
design-build contractors to ensure greater reliability of the support
costs. We collected design-build cost data from the JCC-I/A, including
summaries of support costs by sector. These data were based on
design-build contractor cost reporting to JCC-I/A and GRD/PCO officials.
Although we did not audit the cost data and are not expressing our opinion
on them, we reviewed the data for discrepancies and checked them against
other sources, when available. We determined that the data were
sufficiently reliable to report in aggregate for each sector.

We also reviewed contractor and agency reports and interviewed contractors
and agency officials in Iraq and the United States. Specifically, we
reviewed CPA, GRD/PCO, State, Army Corps of Engineers, and other reports.
We also interviewed agency officials from GRD/PCO, Army Corps of
Engineers, State, and State's Iraq Reconstruction Management Office in
Washington, D.C., and Iraq. In addition, our analysis is based on our
completed and ongoing reviews of efforts to rebuild Iraq, which we have
undertaken since 2004, and reports of other inspector generals related to
contract management, internal controls, and oversight of U.S.
reconstruction activities.

We conducted our review from November 2005 to December 2006 in accordance
with generally accepted government auditing standards. In addition to
interviews with U.S. officials via teleconference and videoconference, we
traveled to Iraq in November 2005 and early April 2006 to interview U.S.
officials in Baghdad. In addition, when possible, we interviewed officials
when these officials traveled to the United States.

We are sending this report to interested congressional committees and to
the Secretaries of State and Defense. We will also make copies available
to others on 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 concerning this report, 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 include
Stephen M. Lord, Assistant Director; Lynn Cothern; Tim DiNapoli; Micah
McMillan; Mary Moutsos; and Adam Vodraska.

Joseph A. Christoff
Director, International Affairs and Trade

List of Congressional Committees

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 Ted Stevens
Chairman
The Honorable Daniel K. Inouye
Ranking Minority Member
Subcommittee on Defense
Committee on Appropriations
United States Senate

The Honorable Jerry Lewis
Chairman
The Honorable David R. Obey
Ranking Minority Member
Committee on Appropriations
House of Representatives

The Honorable C. W. Bill Young
Chairman
The Honorable John P. Murtha, Jr.
Ranking Minority Member
Subcommittee on Defense
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 Henry J. Hyde
Chairman
The Honorable Tom Lantos
Ranking Minority Member
Committee on International Relations
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 H. Shays
Chairman
The Honorable Dennis J. Kucinich
Ranking Minority Member
Subcommittee on National Security, Emerging Threats and International
Relations
Committee on Government Reform
House of Representatives

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