OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION

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SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION 

Baghdad, Iraq 

January 28, 2008 

MEMORANDUM FOR U.S. AMBASSADOR TO IRAQ 

DIRECTOR, IRAQ TRANSITION ASSISTANCE OFFICE 

COMMANDING GENERAL, JOINT CONTRACTING COMMAND 

– IRAQ/AFGHANISTAN 

COMMANDING GENERAL, GULF REGION DIVISION, U.S. 

ARMY Corps of engineers 

SUBJECT: Report on Review of Outcome, Cost, and Oversight of Iraq Reconstruction 

Contract W914NS-04-D-0006 (SIGIR 08-010) 

This report is provided for your information and use. It discusses the results of our review of 

Parsons Delaware, Inc. Contract W914NS-04-D-0006 for reconstruction efforts in Iraq. It 

complements other audit work related to reconstruction work in Iraq by Parsons Delaware, Inc. 

on other contracts and is one of a series of focused contract reviews. This review was conducted 

as project 7011. 

We considered comments from the U.S. Army Corps of Engineers Gulf Region Division when 

preparing the final report. The comments are addressed in the report, where applicable, and a 

copy is included in Management Comments section of this report. 

We appreciate the courtesies extended to our staff. For additional information on this report, 

please contact Mr. Glenn D. Furbish (703) 428-1058 / glenn.furbish@sigir.mil 

 

Stuart W. Bowen, Jr. 

Inspector General 

400 Army Navy Drive • Arlington, Virginia 22202
Table of Contents 

Executive Summary i 

Introduction 1 

Contract Outcomes 7 

Contract Oversight and Adminstration 15 

Conclusions and Lessons Learned 20 

Management Comments 30

Appendices 

A. Scope and Methodology 21 

B. Contract Award Process 24 

C. Task Order Summaries 25 

D. Acronyms 28 

E. Audit Team Members 29 
Review of Outcome, Costs, and Management Oversight of 

Iraq Reconstruction Contract W914NS-04-D-0006 

SIGIR-08-010 January 28, 2008

Executive Summary 

Introduction 

In March 2004, the U.S. Army Corps of Engineers, on behalf of the Coalition Provisional 

Authority (CPA), awarded Parsons Delaware, Inc. (Parsons) a cost-plus-award-fee contract 

(W914NS-04-D-0006) to provide design and construction services. This contract was one of ten 

design/build construction contracts approved by the Deputy Assistant Secretary of the Army 

(Policy and Procurement) to provide an overarching framework for procuring design/build 

construction services to restore the Iraqi infrastructure. The contracts were issued in defined 

work sectors, such as the electric sector and the water resources and sanitation sector. This 

Parsons contract was awarded for projects in the buildings, housing, and health care sectors. The 

statement of work for each contract was generic and performance based, however, the Parsons 

contract identified three objectives: 

• repair and renovate selected Iraqi ministry buildings that suffered severe looting, 

vandalism and some fire damage 

• renovate and repair Iraq hospitals to improve functions and cleanliness required of 

hospitals 

• build new primary healthcare clinics throughout Iraq. 

These objectives were to be accomplished by issuing task orders against the basic contract. The 

government subsequently issued a total of 14 task orders against the contract’s $500 million 

ceiling; 11 task orders for construction projects, and 3 task orders for mobilization, program 

support services, and contract close-out. These were the 11 construction task orders: 

• 2 construction task orders to renovate or repair three Iraqi ministry facilities 

• 6 task orders to renovate 20 existing Iraqi hospitals 

• 3 task orders to design and construct 150 Primary Healthcare Centers (PHCs) 

The objectives of this audit were to assess (1) the outcome of work initiated under this contract, 

and (2) adequacy of the internal controls used for contract management. 

i 
Results 

As of August 15, 2007, $365,217,336 has been obligated and $342,088,911 disbursed against the 

contract’s $500 million construction ceiling.1 Final contract costs are pending required incurredcost audits of the contractors work by the Defense Contract Audit Agency (DCAA) and the 

settling of contractor claims. Of the 11 construction task orders under the Parsons contract; 3 

were completed and 8 were terminated for the convenience of the government but with some 

work completed. When a contract is terminated for the convenience of the government, specific 

reasons for the termination are not identified. However, in a written response to an earlier SIGIR 

report on PHCs, the U.S. Army Corps of Engineers Gulf Region Division (GRD) identified 

reasons it was displeased. These include a lack of control of subcontractors, poor construction 

management and supervision, and a lack of cost control. According to GRD officials 

1. Parsons successfully completed all work on two task orders (Task Orders 2 and 5) to 

renovate and repair three Iraqi ministerial buildings at a total cost of $9,744,964. Both task 

orders had changes in scope but were completed within definitized costs.2

2. Parsons successfully completed all work on one task order (Task Order 10) to rehabilitate 

eight maternity and pediatric hospitals in northern Iraq at a cost of $16,182,230. This task 

order had 18 modifications including eight modifications to the task order’s statement of 

work. For example, a sewage treatment plant was added to one hospital. The task orders 

were completed within definitized costs. 

3. Parsons had five task orders (task orders 3, 6, 8, 9, and 13) to rehabilitate 12 maternity and 

pediatric hospitals terminated for the convenience of the government. At the time of 

termination, work was completed on four hospitals, and between 78% and 98% of the work 

was completed on the remaining eight. 

• Task Order 3 (for one hospital) had a definitized cost of $14,193,200, and obligations of 

$9,585,023. The task order was 80% completed and was one year past its planned 

completion date. 

• Task Order 6 (for three hospitals) had a definitized cost of $19,399,885, and obligations 

of $16,755,944. One hospital was completed and two hospitals were estimated at six 

weeks from their planned completion date and 87-88% complete. 

• Task Order 8 (for four hospitals) had a definitized cost of $13,505,103, and obligations of 

$11,066,849. Three hospitals were completed and the remaining hospital was 82% 

completed but six months past its planned completion date. 

• Task Order 9 (for one hospital) had a definitized cost of $5,072,730, and obligations of 

$4,412,859. The hospital was 90% completed but was six months past its planned 

completion date. 

 

1

 The contract had a $500 million ceiling, consisting of $425 million for construction, a base fee of $15 million, and 

a maximum award fee of $60 million. 

2

 Definitization is the process in which the government and the contractor come to agreement on contract terms, 

specifications, and price. 

ii 
• Task Order 13 (for three hospitals) Task Order 13 had an estimated cost of $11,923,384. 

At the time of termination, the three hospitals were between 78% and 98% completed and 

had estimated costs of $10,410,685. 

4. Parsons had three task orders (Task Orders 4, 11, 12) for the design and construction of 150 

PHCs terminated for the convenience of the government. Work was completed on six PHCs, 

and between 9% and 99% of the required work was completed on 135 PHCs. Eight PHCs 

were dropped after consultations with the Iraqi Ministry of Health. One PHC was dropped 

but construction was continued through direct contracting. The total government estimated 

costs for construction and equipment for the healthcare centers was approximately 

$186,030,873, as of August 15, 2007. 

5. The three mobilization, program support services, and contract close-out task orders (Task 

Orders 1, 7, and 14) had total obligations of $124,808,083, or 34% of total contract 

obligations. Approximately, $115,846,799 (32%) funded program support services (life 

support, security management, information technology, in-country project management staff, 

travel, project office costs, insurance, warranty, and Defense Base Act insurance. High 

contract administrative costs were cited by GRD as a reason for terminating contract work. 

SIGIR examined the management and contract oversight structure for this contract and found 

numerous weaknesses. Most of these problems were originally identified in our earlier report on 

PHCs and to the extent they are discussed in this report they are only to illustrate problems that 

affected the contract before it was terminated. GRD and the Joint Contracting CommandIraq/Afghanistan (JCC-I/A) have taken action to resolve some of these issues and management 

actions are discussed later in this report. Some of the weaknesses identified in the audit include: 

• The contracting and program management offices suffered from a heavy rotation of 

personnel. Moreover, the contracting office personnel had limited construction 

contracting experience. 

• GRD was not responsive to contractor requests for equitable adjustments and excusable 

delays based on unplanned site conditions, design or scope changes, or site access 

restrictions or security. For example, many PHC sites were selected by “map spot” and 

some were not suitable for building. At the same time, the contractor accepted unrealistic 

schedules and costs for delivering projects, and failed to accurately report project status 

as it fell behind. 

• The security environment and a limited number of U.S. government quality assurance 

personnel affected government oversight of the task orders. For example, GRD officials 

reported that its South region was responsible for more than 400 projects but employed 

fewer than 40 military and civilian field engineers and construction inspectors. 

• The contract was not specific on the data requirements of the cost performance report and 

the government did not require Parsons to produce the monthly reports required by the 

contract. 

iii 
During the course of this review, we identified some additional oversight issues: 

• Parsons did not provide adequate oversight of its subcontractors. GRD provided 

numerous documents referencing inconsistent and infrequent visits to the project sites by 

the contractor’s personnel. As a result, there was an overall lack of “ground truth” in 

reporting construction progress, 

• Contractor invoices were not reviewed before payment. Instead, the invoices were sent 

directly to the DCAA creating a potential for payment for work that was not performed or 

not performed to standards. 

Management Actions. U.S. government officials took steps to address some of the problems 

identified in this report. 

• The U.S. government has committed to complete as many projects as possible. GRD has 

continued the work via direct contracting with local Iraqi companies and has completed 

many of the projects since Parsons' work was terminated. According to GRD Officials’ 

since termination, construction has been completed on an additional 68 PHCs and 2 

hospitals. 

• On July 18, 2005, JCC-I/A issued a “letter of concern” to Parsons stating, “This letter of 

concern is issued regarding certain shortfalls and non-compliance issues with quality, 

safety, schedule and performance criteria that must be immediately addressed and 

rectified.” The letter referred to issues raised as a result of a Project and Contracting 

Office (PCO) site visit to PHCs in the Baghdad area. 

• In the Fall of 2005, JCC-I/A assigned an overall interim unsatisfactory performance 

evaluation to the contractor because of unmet milestones, schedule slippages, and elusive 

administrative task order costs. 

• Lacking confidence in the Parsons Global Services, Inc. weekly cost performance reports, 

the contracting officer requested the monthly cost performance reports as prescribed by 

contract section 2.3.5. On October 23, 2005, the government and Parsons agreed upon a 

format for the new reports. Subsequently, Parsons has produced monthly cost 

performance reports in the new format. 

• On October 24, 2005, the contracting officer briefed PCO and Parsons Global Services, 

Inc. that required procedures for “constructive changes” to the project would be enforced. 

The contracting officer required that future constructive changes be properly definitized. 

He also pushed the formal process to bring the outstanding request for equitable 

adjustment (REA) to resolution. On December 21, 2005, negotiations commenced to 

reconcile Parsons’ $39 million REA. As of February 24, 2006, 50 of 58 items had been 

resolved for $22 million. An agreement was signed and the task orders were funded. 

The eight remaining items were resolved under a unilateral agreement and the contract 

modification was signed on March 17, 2006. 

iv 
• On December 21, 2005, Parsons Global Services, Inc. and the U.S. government 

commenced negotiation regarding Parsons’ submission of excusable delays. An 

agreement was reached and schedules were adjusted in February, 2006. 

• On February 4, 2006, GRD-PCO convened a teleconference with both U.S. government 

officials and Parsons’ representatives to determine a workable solution for how many 

PHCs should be completed by Parsons and how many PHCs should be descoped. The 

conference led to the plan where Parsons would complete 20 centers by April 3, 2006, 

and the other 121 centers would be descoped. GRD began exploring other avenues to 

complete as many PHCs as possible. 

• As previously noted, the U.S. government has committed to complete as many projects as 

possible. In GRD’s response to draft of this report, they stated, as of January, 2008 it has 

turned over 74 PHCs to the Ministry of Health, another 17 are in post-construction and an 

additional 39 are in advanced stages of construction. 

Lessons Learned 

The U.S. reconstruction program in Iraq has been exceedingly difficult. From the beginning, 

there have been planning and deployment issues resulting in delays in the start-up of projects and 

increased contractor overhead costs. Rising security problems also made pre-award site 

assessments difficult to perform, created problems in defining project requirements, and, in some 

cases, prevented project site selection. The security environment also affected the delivery of 

supplies and affected both the government’s ability to successfully oversee its contractor’s work 

and the contractor’s capacity to properly supervise its subcontractors. 

In this environment it is not unexpected that individual project costs would increase and projects 

would be delayed. What is not expected, however, is the inability of management to remedy 

problems in a timely manner. This contract demonstrates multiple problems: 

• The statements of work for these task orders were poorly defined. 

• The contractor accepting an unrealistic schedule, fell steadily behind that schedule, and 

failed to accurately report project status 

• The government failed to take timely action to remedy the problems. 

Although government visits to project sites were clearly difficult, oversight and surveillance of 

service and construction contracts is a fundamental element of acquisition, and is the collective 

responsibility of the requiring and contracting activities. For this particular contract, there were 

clearly problems on both sides. However, SIGIR believes that the preeminent lesson learned is 

that the government is responsible for ensuring that the contractor satisfies contract cost, 

schedules and performance requirements. 

v 
Management Comments and Audit Response 

GRD provide comments and stated that it supports the overall report. However, GRD expressed 

concern that the report repeats a number of claims made by the contractor during the original 

audit that were not agreed with by GRD. GRD’s comments are printed in their entirety on page 

30 of this report. GRD also provided technical comments that are addressed in the report where 

appropriate.

vi 
Introduction 

Background 

In March 2004, the U.S. Army Corps of Engineers, on behalf of the Coalition Provisional 

Authority (CPA), awarded Parsons Delaware, Inc. (Parsons) a cost-plus-award-fee contract 

(W914NS-04-D-0006) to provide design and construction services. This contract was one of ten 

design/build construction contracts approved by the Deputy Assistant Secretary of the Army 

(Policy and Procurement) to provide an overarching framework for procuring design/build 

construction services to restore the Iraqi infrastructure. The contracts were issued in defined 

work sectors, such as electrical sector, and public works/water sector. Contracts awarded were 

to be competitively awarded and include a 2-year base period with 3 one-year option periods. 

This contracting approach was intended to allow continuity of operations and facilitate recompetition after the completion of these contracts. 

This Parsons contract was awarded for projects in the buildings, housing, and health sectors. The 

statement of work for each contract was generic and performance based, however, the Parsons 

contract identified three objectives 

• repair and renovate selected Iraqi ministry buildings that suffered severe looting, 

vandalism and some fire damage in 2004 

• renovate and repair Iraq hospitals to improve functions and cleanliness required of 

hospitals 

• build new primary healthcare clinics throughout Iraq 

These objectives were to be accomplished by issuing task orders against the basic contract. The 

government subsequently issued a total of 14 task orders against the contract’s $500 million 

ceiling;3

 3 task orders for mobilization, program support services, and contract close-out, and 11 

task orders for construction projects. The construction task orders were: 

• 2 task orders to renovate or repair 3 Iraqi ministry facilities 

• 6 task orders to renovate of 20 existing Iraqi hospitals. The objectives of this audit were 

to assess (1) the outcome of work initiated under this contract, and (2) the internal 

controls used for contract management. 

• 3 task orders to design and construct 150 Primary Healthcare Centers (PHCs) 

 

3

 In total, the contract had a $500 million ceiling consisting of $425 million for construction, a 

base fee of $15 million, and a maximum award fee of $60 million. 

i 
Responsible Organizations 

Three organizations have responsibility for management of the contract: U.S. Army Corps of 

Engineers Gulf Region Division-Project and Contracting Office (GRD-PCO), Iraq 

Reconstruction Management Office (IRMO), and Joint Contracting Command-Iraq/Afghanistan 

(JCC-I/A). However, during the first 21 months of the contract, the Project and Contracting 

Office (PCO) and the U.S. Army Corps of Engineers Gulf Region Division (GRD) were separate 

organizations. On December 4, 2005, the PCO was folded into the GRD. On May 9, 2007, the 

President created the Iraq Transition Assistance Office (ITAO) as the successor organization to 

the Iraq Reconstruction Management Office (IRMO). In addition, two companies in a joint 

venture, Louis Berger Group, Inc. and URS Group, Inc. were contracted to provide management 

support.

Project and Contracting Office 

National Security Presidential Directive 36, “United States Government Operations in Iraq,” 

May 11, 2004, also established the PCO and directed the PCO to provide acquisition and project 

management support for activities in Iraq. On June 22, 2004, the Deputy Secretary of Defense 

established the PCO within the Department of the Army and directed the PCO to provide support 

for all activities associated with financial, program, and project management for both 

construction and non-construction IRRF activities. 

U.S. Army Corps of Engineers Gulf Region Division 

GRD provides engineering services in the Iraq combat theater to Multi-National Force-Iraq and 

the Iraqi government with planning, design, and construction management support for military 

and civil infrastructure construction. PCO delegated contract administration for contract 

W914NS-04-D-0006 to the U.S. Army Corps of Engineers, Gulf Region Central-Baghdad on 

September 18, 2004. On the same day, PCO delegated administrative contracting officer 

authority to the Director of Contracting, U.S. Army Corps of Engineers, Gulf Region CentralBaghdad. The Corps of Engineers receives a fee for their services. In the case of the Parsons 

contract they were entitled to a Supervision and Administration Fee of up to four percent. 

Sector Project and Contracting Office Contractor 

Berger/URS, a joint venture between the Louis Berger Group Inc. (Washington, D.C.) and URS 

Group Inc. (San Francisco, Calif.), was awarded a contract to provide dedicated support to the 

Buildings/Education/Health Sector Program Management Office under the Coalition Provisional 

Authority Program Management Office. The support contractor continued to provide support 

under the PCO.

Iraq Reconstruction Management Office (IRMO) 

The Iraq Reconstruction Management Office had the responsibility to approve contracts. 

National Security Presidential Directive 36, “United States Government Operations in Iraq,” 

May 11, 2004, established the IRMO within the Department of State and directed that 

organization to facilitate the transition in Iraq. IRMO reported to the Chief of Mission in Iraq. 

The Iraq Transition and Assistance Office (ITAO) was created by Executive Order as the 

successor organization to IRMO on May 9, 2007. 

ii 
Joint Contracting Command-Iraq/Afghanistan (JCC-I/A) 

The head of contracting activity, JCC-I/A has the responsibility to administer contracts. The 

JCC-I/A was established in 2004 to consolidate contracting activities and reports through the 

Deputy Assistant Secretary of the Army (Policy and Procurement) to the Assistant Secretary of 

the Army for Acquisition, Logistics, and Technology. 

The CPA used limited competition to award the design-build contract for the buildings, health 

and education sectors. Thirteen vendors submitted proposals. Of these, four were determined to 

be within the competitive range. The Source Selection Authority evaluated the remaining four 

and Parsons was awarded the contract after the review determined it represented the best value to 

the government. Additional information on awarding the contract is in Appendix B. 

Costs 

Chart 1—Financial Summary Task Order Costs 

Administrative Task Orders; 

Administrative vs. Construction Task Orders

$113

$247

$0

$50

$100

$150

$200

$250

$300

Sum of 1,7, 14 Sum of 

2,3,4,5,6,8,9,10,11,12,13

Millions

Task Orders

Total Estimated Cost Aw ard Fee

Base Fee

Estimated Cost

 69%

$264

 31%

$125

1 Mobilization, 

7 Programmatic Support 

14 Close-out 

Construction Task Orders: 

2 Ministry of Industry and 

 Minerals 

3 Hospital 

4 Central PHCs 

5 Education Ministries 

6 Southern Hospitals 

8 South Central Hospitals 

9 Hospital 

10 Northern Hospitals 

11Northern PHCs 

12 Southern PHCs 

13 Central Hospitals.

Source: SIGIR Analysis, Joint Contracting Command – Iraq/Afghanistan. 

The government total cost estimate is $389 million and the government has disbursed $342 

million to Parsons as of August 15, 2007. 

As stated earlier, Parsons submitted monthly contract performance reports capturing all costs that 

took place during the period and cumulative costs to date. The report is grouped by task orders 

reflecting the cost of construction elements within each task order, cumulative to date, and 

estimation at completions. Furthermore, the reports summarized the total cost of all task orders 

iii 
by work structure elements, such as labor, security, life support, med/equipment, and 

subcontracts. 

SIGIR’s analysis of the monthly contract performance report as of February 23, 2007 found that 

the cumulative budgeted costs to date were $366,604,612 while the actual cumulative cost of 

work performed was $329,265,936, or 90% of budgeted costs. As shown below, in table 1, Task 

Order 7, Programmatic Support Services, had the highest costs of the 14 task orders, about 32% 

of total work performed. The subcontractor’s elements had the highest allocated amount, about 

53% of the total work among the six structure elements. 

Table 1—Cumulative Actual Cost of Work Performed Allocated to Task 

Orders 

Task Order Dollars %

01 Mobilization $5,367,062 2%

02 Renovate Ministry of Industry & Minerals HQs Building $7,928,993 2%

03 Modernize Maternity & Pediatric Hospital – Ibn Al Baladi $8,814,353 3%

04 Ministry of Health – Healthcare Centers in Central Iraq $47,286,008b 14%

05 Ministry of Education HQs complex & Associate Buildings $974,273 1%

06 Modernize Hospitals in Southern Iraq $14,358,824 4%

07 Programmatic Support Services $104,166,808 32%

08 Modernize Hospitals – South Central Iraq $10,056,843 3%

09 Modernize Hospitals – North Central Iraq $3,998,220 1%

10 Modernize Hospitals – Northern Iraq $14,649,909 4%

11 Ministry of Health – Healthcare Centers in Northern Iraq $46,163,407b 14%

12 Ministry of Health – Healthcare Centers in Southern Iraq $53,897,287b 16%

13 Modernize Maternity & Pediatric Hospitals $9,257,091b 3%

14 Programmatic Closed-Out $2,346,858 1%

Grand Totals $329,265,936 100%

a See also Tables 1 and 2, Appendix B for updated US Government estimates as of August 15, 2007. 

Source: SIGIR analysis of Parsons’ monthly contract performance report as of February 2007

iv 
Table 2—Cumulative Actual Cost of Work Performed Allocated to Six 

Structure Elements 

Structure Elements Dollars % 

10000 Labor $48,345,849 15% 

10005 Security $28,232,277 9% 

11034 Life support $6,280,967 2% 

40000 Material/Equipment $56,536,480 17% 

70000 Subcontracts $174,988,282 52% 

90000 Other Direct Costs $14,989,651 5% 

Totals $329,373,506 100% 

Source: SIGIR analysis of Parsons’ monthly contract performance report as of February 2007. 

Table 3 shows the cumulative costs of the contract and related task orders as of August 15, 2007. 

Table 3—Actual Costs Compared to Estimated Costs as of August 15, 2007

Task 

Order Description 

Estimated 

Cost Disbursements Status 

1 Mobilization $5,940,509 $5,936,192 Completed 

2 Renovate Ministry of Industry 

and Ministerial buildings 8,257,981 8,258,377 Completed 

Terminated for 

Convenience 3 Renovate Ibn Al Baladi Hospital 9,585,023 9,365,516

4 

Design and construct 41 Primary 

Healthcare Centers in northern 

Iraq. Provide equipment 

50,594,431 45,671,168 Terminated for 

Convenience 

5 Repair Ministries of Education 

and Higher Education Complex 1,115,736 1,187,575 Completed 

6 

Rehabilitate 5 maternity and 

pediatric hospitals in southern 

Iraq 

16,775,944 16,235,593 Terminated for 

Convenience 

Term Task Order 

ended 7 Programmatic support services 115,846,710 113,826,387

8 

Rehabilitate maternity and 

pediatric hospitals in south 

central Iraq. 

11,066,849 10,425,089 Terminated for 

Convenience 

9 Rehabilitate the Gynecology, 

Obstetrics & Children's Hospital 4,562,774 4,279,626 Terminated for Convenience 

10 Rehabilitate 8 maternity and 

pediatric hospitals in northern 16,182,230 15,935,975 Completed 

v 
Iraq. 

11 

Design and construct 49 Primary 

Healthcare Centers in northern 

Iraq. Provide equipment. 

63,717,850 45,780,825 Terminated for 

Convenience 

12 

Design and construct 60 Primary 

Healthcare Centers in southern 

Iraq. Provide equipment 

71,718,592 53,706,323 Terminated for 

Convenience 

13 Rehabilitate 3 maternity and 

pediatric hospitals in central Iraq 10,410,685 8,762,189 Terminated for Convenience 

On-going close out 

Task order 14 Close out task order. 2,900,000 2,718,076

 TOTAL $388,675,314 $342,088,911

Objectives 

The objectives of this audit were to assess (1) the outcome of work initiated under this contract, 

and (2) the adequacy of the internal controls used for contract management. 

For a discussion of the audit scope and methodology, and a summary of prior coverage, see 

Appendix A. For a summary of the contracting process, see Appendix B. For a summary of the 

14 task orders, see Appendix C. For acronyms used, see Appendix D. For the audit team 

members, see Appendix E. 

vi 
Contract Outcomes 

Parsons overall performance, measured in terms of construction completions, varied by the type 

of facility. Of the 11 construction task orders under the contract; three were completed and eight 

were terminated for the convenience of the government but with much of the work completed. 

According to GRD officials, Parsons completed all work on the ministerial buildings; completed 

work on 12 hospitals but only finished between 78% and 98% of the required work on the 

remaining eight hospitals; and only completed six of 141 primary healthcare centers. Completed 

work on the remaining healthcare centers ranged from 9% to 99% of requirements. 

When a contract is terminated for the convenience of the government, specific reasons for the 

termination are not identified. However, in a written response to our earlier PHC report, GRD 

identified numerous reasons it was displeased including a lack of control of subcontractors, poor 

construction management and supervision, and a lack of cost control. This is discussed in more 

detail later in this report. 

Ministerial Buildings 

Parsons successfully completed all work on two task orders (Task Orders 2 and 5) to renovate 

and repair three Iraqi ministerial buildings. Both task orders had changes in scope but were 

completed within definitized costs of $9,744,964. 

Task Order 2: In March, 2004, the CPA issued Parsons a task order to renovate and repair the 

Ministry of Industry and Minerals Headquarters buildings with an initial estimated cost of 

$5,200,000. The scope of work was modified several times to add design requirements, a 

heating and air conditioning system, and a fire suppression system. Parsons completed all 

renovation and repairs. As of April 9, 2007 the government cost estimate for the work 

performed was $8,257,981, and as of August 15, 2007, the government had disbursed 

$8,258,377. 

Table 4—Financial Summary of Task Order 2

Task Order Initial Estimate Modifications 

Current 

Estimate Variance 

2 $5,200,000 12 $8,257,981 $3,057,981 

vii 
Ministry of Industry & Minerals Headquarters Building 

Task Order 5: In May, 2004, the CPA issued Parsons a task order to repair the infrastructure of 

the Ministries of Education and Higher Education Headquarters Complex. The complex suffered 

severe looting, vandalism, and some fire damage. The complex included an 11 story Higher 

Education tower; an 11 story Education tower; an auditorium located between the two towers, 

and accessory buildings such as guard houses and parking structures. The initial estimated cost 

was $5 million. However, the contract was modified 7 times and significant amounts of work 

were removed from the statement of work. As of October 4, 2004, all work not completed was 

deleted from the task order except for clearing the basement, providing electric power, 

completing a security wall, and maintaining security at the site. The revised cost estimate for the 

new scope of work was $1,115,736. 

Table 5—Financial Summary of Task Order 5

Task Order Initial Estimate Modifications 

Current 

Estimate Variance 

5 $5,000,000 7 $1,115,736 ($3,884,264) 

Obligations and Disbursements as of August 15, 2007. 

Source: JCC-I/A; CEFMS, USACE/GRD 

Hospitals 

To improve the quality of healthcare provided in Iraqi hospitals, the CPA issued Parsons 6 task 

orders to renovate and repair 20 maternity and pediatric hospitals throughout Iraq. In May 2006, 

the Gulf Region Division terminated the task orders for the convenience of the government. At 

the time of termination, Parsons had completed all work on 12 hospitals. The work on the 

remaining eight hospitals was from 78% to 98% complete, with a non-weighted average of 85% 

for each hospital that Parsons did not finish. By April 9, 2007, the government estimated cost for 

repair and renovation work on the 20 hospitals was $68,583,505 and the government disbursed 

$65,003,989 to Parsons, as of August 15, 2007. 

viii 
Task Order 3: In March 2004, Parsons was given a task order to make improvements in a 

maternity and pediatric hospital to meet functional and cleanliness standards. The intent was to 

renovate and remodel the hospital to include repairing or replacing the plumbing, heating and air 

conditioning systems, and electrical systems. The original estimate was $5,500,000. In total, the 

task order was modified 21 times, with the estimated cost initially increasing to $43,280,380 as 

optional equipment was added to the task order, and then decreasing to $9,585,023 as items were 

deleted, such as the Thalassemia Center and doctors’ residence. Parson’s completed 80% of the 

work before the contract was terminated for the convenience of the government. A follow-on 

contractor had completed 99% of the project as of August, 2007. 

Table 6—Financial Summary of Task Order 3

Task Order Initial Estimate Modifications 

Current 

Estimate Variance 

3 $5,500,000 21 $9,585,023 $4,085,023 

Obligations and Disbursements as of August 15, 2007. 

Source: JCC-I/A; CEFMS, USACE/GRD. 

Task Order 6: In June 2004, Parsons was given a task order to rehabilitate three maternity and 

pediatric hospitals in southern Iraq. Parsons was to provide, repair or replace building systems 

that were to be identified in surveys, and to provide new equipment to be identified by the U.S. 

government. The original estimated cost for the project was approximately $20,962,327. The 

task order was modified 16 times, and was terminated for the convenience of the government in 

August 2006. At the time of termination the definitized cost was $16,235,593. Parsons 

completed one hospital and the remaining two hospitals were 87% and 88% complete. 

Table 7—Financial Summary of Task Order 6

Task Order Initial Estimate Modifications 

Current 

Estimate Variance 

6 $20,962,327 16 $16,235,593 ($4,726,734) 

Obligations and Disbursements as of August 15, 2007. 

Source: JCC-I/A CEFMS, USACE/GRD. 

Task Order 8: In September 2004, Parsons was given a task order to modernize four hospitals 

in south central Iraq. Parsons was to provide, repair, or replace building systems that were to be 

identified in property assessment surveys. The purchase of new equipment was also authorized. 

The original estimated cost for the project was approximately $10,454,820. The task order was 

modified 12 times, and in May 2006, was terminated for the convenience of the government. At 

the time of termination the estimated cost was $11,066,849. Parsons completed three hospitals 

and approximately 79% of the fourth hospital. 

ix 
Table 8—Financial Summary of Task Order 8

Task Order Initial Estimate Modifications 

Current 

Estimate Variance 

8 $10,454,820 12 $11,066,849 ($612,028) 

Obligations and Disbursements as of August 15, 2007. 

Source: JCC-I/A; CEFMS, USACE/GRD. 

Task Order 9: In September 2004, Parsons was given a task order to renovate and modernize 

one hospital in north central Iraq. Parsons was to provide, repair, or replace building systems 

that were to be identified in property assessment surveys. The original estimated cost for the 

project was approximately $5,072,730. The contract was modified nine times and in May 2006, 

was terminated for the convenience of the government. At the time of termination, the estimated 

cost of the hospital was $4,562,774. According to the contracting officer, the hospital was 90% 

complete at the time it was terminated. 

Table 9—Financial Summary of Task Order 9

Task Order Initial Estimate Modifications 

Current 

Estimate Variance 

9 $5,072,730 9 $4,562,730 ($509,956) 

Obligations and Disbursements as of August 15, 2007. 

Source: JCC-I/A; CEFMS, USACE/GRD. 

Task Order 10: In September 2004, Parsons was issued a task order to make improvements in 

maternity and pediatric hospitals in northern Iraq. Parsons was to perform work required to 

modernize eight maternity hospitals and to provide, repair or replace prioritized building systems 

identified in property assessment surveys. The original estimated cost for this task order was 

$18,114,214. Parsons completed all work on this task order. 

Table 10—Financial Summary of Task Order 10

Task Order Initial Estimate Modifications 

Current 

Estimate Variance 

10 $18,114,241 18 $16,182,230 ($1,932,011) 

Obligations and Disbursements as of August 15, 2007. 

Source: JCC-I/A; CEFMS, USACE/GRD. 

Task Order 13: Task Order 13 was originally part of Task Order 6, which was issued in June 

2004. Task Order 6 called for the construction of six maternity and pediatric hospitals, however, 

x 
modification 8 cancelled three of the hospitals, and these three hospitals were reinstated in 

October 2004 as Task Order 13. Parsons was to make improvements to maternity and pediatric 

hospitals in central Iraq, and to provide, repair, or replace prioritized building systems to be 

identified in property assessment surveys. The original estimated cost was $11,923,384. The 

task order was terminated for the convenience of the government in May 2006. At the time of 

termination, the three hospitals were between 78% and 98% completed and had estimated costs 

of $10,410,685. 

Table 11—Financial Summary of Task Order 13

Task Order Initial Estimate Modifications 

Current 

Estimate Variance 

13 $11,923,384 7 $10,410,865 ($1,512,702) 

Obligations and Disbursements as of August 15, 2007. 

Source: JCC-I/A; CEFMS, USACE/GRD. 

Primary Healthcare Centers 

To meet the health needs of the people of Iraq, the CPA issued Parsons three task orders (Task 

Orders 4, 11, and 12) to design and construct 150 new primary healthcare centers (PHCs) 

throughout Iraq: 40 in central Iraq, 50 in northern Iraq and 60 in southern Iraq. There were to be 

3 standard healthcare center designs: a model center (Type A - 1,324 m2), a model center with 

teaching facilities (Type B - ≈ 1,400 m2), and a model center with emergency and labor facilities 

(Type C – 2,126 m2). After the design phase, the Ministry of Health was to determine the exact 

locations to construct the centers. The task orders also required Parsons to provide medical and 

dental equipment for the centers. The medical equipment included x-ray equipment, hematology 

analyzer, exam tables, patient beds, defibulators, EEG, ventilators, and incubators, and the dental 

equipment included dental chairs, lights, cabinets, instruments, and supplies. 

In consultation with the Ministry of Health, eight centers, in their very early stages, were 

subsequently dropped. One center was awarded via a direct contract to an Iraqi construction 

firm. Of the remaining 141, Parsons completed all work on 6 centers in Baghdad and a portion of 

the work on 135 centers throughout the country. In March 2006, the three task orders were 

terminated for the convenience of the government. 

At the time of termination, the Iraqi government had accepted the six completed PHCs and 

offered Parsons the opportunity to complete 14 of the remaining 135. However, according to 

GRD officials, by the end of April the government decided to accept the remaining 14 “as is.” 

GRD officials also stated that these 14 PHCs have required extensive repairs. From data 

provided by JCC-I/A, SIGIR estimated the non-weighted completion average to be 83% in 

central Iraq, 67% in northern Iraq, and 56% in southern Iraq. The total government estimated 

cost for construction and equipment was approximately $186,030,873 as of August 15, 2007. 

xi 
Task Order 4: In May 2004, Parsons was awarded a task order to design and construct 150 

PHCs in central Iraq. This task order was incrementally funded with an initial budget of 

$15,000,000 and an estimated cost range of $100,000,000 to $148,000,000. The task order was 

subsequently modified to require construction of 41 PHCs in central Iraq. Two other task orders 

were issued for the construction of the remaining PHCs in northern and southern Iraq. SIGIR 

estimates that Parsons completed 83% of the construction portion of this task order prior to its 

termination in March 2006. The original estimated cost for the 41 PHCs on this task order was 

$43,962,517. The current estimate is $50,594,431. 

Table 12—Financial Summary of Task Order 4

Task Order Initial Estimate Modifications 

Current 

Estimate Variance 

4 $43,962,517 31 $50,594,431 $6,631,914 

Obligations and Disbursements as of August 15, 2007. 

Source: JCC-I/A; CEFMS, USACE/GRD. 

Task Order 11: Task Order 11 was issued in October 2004 in a definitized state for the 

construction of 50 PHCs in northern Iraq. It was decided very early in the process to descope 4 

of the centers. The original estimated cost was $55,600,527. The task order was modified 16 

times including completion date changes, excusable delays and estimated cost increases. 

Ultimately the task order value rose to $66,821,557 then decreased to $63,717,850 when 

unearned award fees were de-obligated. None of the PHCs were completed prior to the task 

order being terminated for the convenience of the government in March 2006. SIGIR estimates 

Parsons completed 67% of the construction portion this task order. 

Table 13—Financial Summary of Task Order 11

Task Order Initial Estimate Modifications 

Current 

Estimate Variance 

11 $55,600,527 16 $63,717,850 $8,117,323 

Obligations and Disbursements as of August 15, 2007. 

Source: JCC-I/A; CEFMS, USACE/GRD. 

Task Order 12: Task Order 12 was issued in October 2004 for the construction of 60 PHCs in 

southern Iraq. The original estimated cost was $40,914,583. The contract was modified in 

December 2004 to include equipment, increasing the estimated cost to $69,021,269. Subsequent 

modifications de-scoped 2 healthcare centers bringing the total to 58. Two additional 

modifications were issued increasing the total estimated cost to $74,347,872 once allowances 

were made for unearned award fees. None of the 58 PHCs were completed by Parsons prior to 

the task order being terminated for the convenience of the government in March 2006. SIGIR 

estimates Parsons completed 56% of the construction portion of the PHCs under this task order 

and the government disbursed $53,706,323 

xii 
Table 14—Financial Summary of Task Order 12

Task Order Initial Estimate Modifications 

Current 

Estimate Variance 

12 $69,021,269 15 $74,347,872 $5,326,603 

Obligations and Disbursements as of August 15, 2007. 

Source: JCC-I/A; CEFMS, USACE/GRD. 

Summary of Task Orders 

Table 15 summarizes the contract task orders and outcomes. 

Table 15: Parsons contract task order descriptions and outcomes 

Task 

Order Description Outcome 

1 Contractor mobilization planning 

and mobilization to theater 

Contractor was paid for incurred costs 

2 Renovate the Iraqi Ministry of 

Industry and Minerals Headquarters 

Successfully completed all work 

3 Modernize one maternity and 

pediatric hospital 

Contract was terminated for the 

convenience of the government. Parsons 

completed 80% of the required work 

4 Design primary healthcare centers 

(PHCs); construct 40 PHCs; provide 

specified equipment 

Contract was terminated for the 

convenience of the government. Parsons 

completed 6 PHCs; 21 additional PHCs 

averaged 70% completion; 3 PHCs were 

removed from the contract. All equipment 

was delivered 

5 Renovate the Iraqi Ministries of 

Education and Higher Education 

Successfully completed all work 

6 Modernize three maternity and 

pediatric hospitals in southern Iraq 

Contract was terminated for the 

convenience of the government. Parsons 

successfully completed one hospital; and 

two hospitals were 87%-88% completed 

7 This task order provided services 

for the other task orders including 

life support, security management, 

information technology, in-country 

project management, travel, 

insurance, warranty, and Defense 

Base Act insurance. 

Contractor was paid for incurred costs 

8 Modernize four maternity and 

pediatric hospitals in south central 

Contract was terminated for the 

convenience of the government. Three 

xiii 
Iraq hospitals were successfully completed; one 

hospital was 79% completed 

9 Modernize one maternity and 

pediatric hospital in north central 

Iraq 

Contract was terminated for the 

convenience of the government. Parsons 

completed 90% of the work 

10 Modernize eight maternity and 

pediatric hospitals in northern Iraq 

Successfully completed all work 

11 Design primary healthcare centers 

(PHCs); construct 46 PHCs; provide 

specified equipment 

Contract was terminated for the 

convenience of the government. Parsons 

completed 96% of four PHCs, and an 

average of 65% of the remaining PHCS with 

a range of 9% to 94%. All equipment was 

delivered 

12 Design primary healthcare centers 

(PHCs); construct 60 PHCs; provide 

specified equipment 

Contract was terminated for the 

convenience of the government. Parsons 

nearly completed three PHCs, and a 

weighted average of 53% of 55 PHCs. Two 

PHCs were dropped from the contract. All 

equipment was provided 

13 Modernize three maternity and 

pediatric hospitals in central Iraq 

Contract was terminated for the 

convenience of the government. Parsons 

completed between 78% and 98% of the 

work on the three hospitals 

14 Supply all labor, material, and 

equipment to close out all task 

orders 

Contractor was reimbursed for incurred 

costs 

Source: SIGIR analysis of GRD data.

Other Costs 

In addition to the contract and task order costs, there were additional costs amounting to $6.6 

million, as shown in Table 3. 

Table 16—Other Costs 

Item Amount 

Corps of Engineers Gulf Region Division S&A fees a $ 6,310,796 

Interest Penalty b 307,643 

Total $6,618,440 

a as of August 2007 

b as of July 2007

Source: SIGIR analysis of data from U.S. Army Corps of Engineer Gulf Region Division 

xiv 
Contract Oversight and Administration 

In April 2006, SIGIR issued a report on the management of the PHC construction project that 

identified a number of weaknesses in the oversight of the project.4

 In that report SIGIR stated 

that quality contracts derive from good contracting practices throughout the life of a contract. 

Creating quality contracts begins before the contract is issued with a well written statement of 

work that describes the customer’s requirements, and includes a thorough review of contractor 

technical proposals submitted in response to the statement of work, along with a carefully 

prepared independent government cost estimate that provides a sound basis for evaluating 

proposals After the contract is awarded quality-building activities include appropriate numbers 

of trained contracting personnel to oversee contracting activities, and quality assurance/quality 

control programs. The quality of a contract derives from the totality of all the activities, rather 

than any one individual activity. Overall, we found weaknesses in a large number of activities. 

Prior SIGIR Assessment of Contract Oversight 

This section summarizes some of the more significant problems identified in our April 2006 

report on PHCs. The problems incurred on the PHC task orders are particularly significant to the 

termination of the entire contract because the PHC task orders represent 70% of the total 

construction value of the contract. These problems were originally identified in our April 2006 

report on Primary Healthcare Centers5 and to the extent they are discussed in this report they are 

only to illustrate problems that affected the contract before it was terminated. GRD and JCC-I/A 

have taken action to resolve many of these issues and management actions are discussed later in 

this report. Some of the weaknesses identified in the audit include: 

Turnover of Government Personnel - The PHC project experienced high turnover of 

government personnel throughout the two years of the project in its contracting, administrative 

contracting, and program management offices. For example, Parsons officials estimate that there 

were approximately 17 different contracting officers since the March 2004 prime contract award. 

While the effect of this turnover on the project is difficult to quantify, in a draft memorandum 

(dated December 2005) addressing the contractor’s performance, GRD states that the significant 

turnover of personnel in support of the contract contributed significantly to a perception of 

inexperience and unresponsiveness. 

Unilateral Direction - During the course of the contract GRD-PCO program management 

directed critical actions without achieving bilateral agreement with the contractor. The report 

cites four instances in which the government directed actions that were not agreed to by the 

contractor, that lead to problems in execution and cost increases. The unilateral direction was 

symptomatic of the acrimonious relationship that existed between GRD and the contractor. 

Responsiveness of U.S. Government - Throughout the contract, but especially since February 

2005, Parsons has submitted requested equitable adjustments and excusable delay notices based 

 

4 Management of the Primary Healthcare Centers Construction Project, SIGIR 06-011, April 29, 2006. 5

Management of the Primary Healthcare Centers Construction Project, SIGIR 06-011, April 29, 2006. 

xv 
on unplanned site conditions, design, or scope changes. For example, the 11 task orders had 47 

changes in scope. Until October 2005, neither agency contracting officials nor the program 

management team were effectively responsive to the requests. 

Changes – Government personnel failed to follow required procedures for making constructive 

changes to the projects. A constructive change is a written or oral order (which includes 

directions, instructions, interpretations, or determinations) from the contracting officer or the 

administrative contracting officer, or actions or inactions on the part of the government hat 

causes a change in the specifications, or method or manner of performance, things to be provided 

by the government, or direction to accelerate the work. U.S. government personnel directed 

constructive changes to the project without following proper procedures. The changes were 

made to the project, but the changes were not properly definitized in a modification to the 

contract. The direction to make constructive changes occurred over a period of months until 

October 2005, when the contracting officer demanded proper definitization for future change. 

According to an agency contracting official, the practice of making constructive changes without 

following formal procedures meant it was hard for the government to get a good deal regarding 

cost, and program managers did not have the opportunity to make good decisions about size and 

volume that could have saved the government money. 

Quality Assurance – GRD did not effectively execute its quality assurance responsibilities. 

SIGIR selected a judgmental sample of ten PHC projects from each of the three GRD districts 

and analyzed quality assurance reports to determine the number of reports filed and their quality. 

SIGIR found the range of reports filed was from 0 to 403 reports. Twelve sites had fewer than 

50 reports filed over the course of a year. The quality of the reports also varied with some well 

written and others incomplete. 

Additional Oversight Problems Identified 

During the course of this review, we identified some additional oversight issues including 

oversight of subcontractors and review of vouchers. 

Oversight of sub-contractors - According to Parsons they awarded 219 construction 

subcontracts on the with the majority of these construction subcontracts awarded based on 

competition utilizing Fixed Firm Price or Fixed Unit Price/Not to exceed price basis. However, 

we noted problems in Parson’s oversight of these subcontractors. GRD provided numerous 

documents referencing inconsistent and infrequent site visits to the project sites by Parson’s 

personnel. According to GRD this led to a lack of “ground truth” on construction progress. 

Parsons officials agreed that they faced numerous challenges in overseeing the work of the 

subcontractors, and cited a number of challenges including 

• fluctuating labor availability due to regional and national hostilities and security 

concerns, as well as the dearth in construction activities; 

• unfamiliarity with construction, safety and quality assurance/quality control procedures 

and standards associated with U.S. government construction projects; 

xvi 
• cultural and language barriers which impacted communications between the 

subcontractor, Parsons and the U.S. government; 

• a lack of familiarity with business practices used by western companies such as billing 

and accounting; and 

• a lack of experience in obtaining materials, equipment, and fixtures that met the Western 

standards of the Prime Contract. 

Review of invoices - Modification 3 of the Parsons contract addressed the submission of 

payment vouchers. According to the modification, invoices were to be submitted directly to 

DCAA for review and provisional approval. At the same time, copies were to be sent to the 

Contracting Officer and to the U.S. Army Corps of Engineers Finance Center, Millington, 

Tennessee for certification for payment. Each submission also had to include a government 

material inspection and receiving report. 

In an April 2006 SIGIR Inspection report of PHCs, SIGIR Inspectors reported that neither 

DCAA nor the USACE Finance Center Millington had requested the USACE Kirkuk Area 

Office or the on-site Quality Assurance Representative (QAR) responsible for the PHCs to 

review or approve the invoices to validate the work claimed by the contractor. In fact SIGIR 

Inspectors observed several instances of construction work, which did not meet the contract’s 

requirements. Further investigation found that the contractor received payment for this noncompliant work. 

GRD officials, in their response to SIGIR’s inspection report, correctly noted interim payments 

do not require approval prior to payment. However, while interim payments may not require 

approval prior to the final invoice it is in the government’s interest for the on-site Quality 

Assurance Representative (QAR) responsible for the project to review or approve the invoices 

and validate work claimed by the contractor. Because this validation did not take place, the 

potential exists for payments to be made to the contractor for work not performed or not 

performed to the contract standards. 

Termination of the Contract 

When a contract is terminated for the convenience of the government, specific reasons for the 

termination are generally not identified. However, in its written response to our PHC report, 

GRD identified a number of reasons it was displeased with the contractor’s performance. 

Among the reasons cited were the following: 

• The contractor subcontracted the PHC design to a local engineering firm but failed to 

properly supervise its work resulting in poor quality submittals and design delays. For 

example, the contractor did not have in-country design professionals specialized in the 

design of medical facilities. 

• The contractor did not have a geotechnical engineer in country that could properly 

supervise the geotechnical investigations. 

xvii 
• The contractor did not plan for the timely preparation of technical specifications. Initial 

submittals were generic, lacked consistency, detail and proper formatting. 

• The contractor subcontracted work to a group of eight firms, most without significant 

construction experience in Iraq. The contractor did not perform due diligence in 

checking the capacity of the firms to perform the required work and whether they had the 

qualifications and Iraqi registrations to perform work in Iraq. 

• The contractor failed to control the work by not making contract provisions against the 

sale of subcontracts through a system of layered brokers. 

• Contractor construction managers and supervisors did not visit the construction sites on a 

regular basis, which prevented the contractor from foreseeing and identifying problems. 

• The contractor did not properly maintain a schedule for the PHCs. Schedules showed 

constant slippages that were not properly addressed.

Management Actions 

JCC-I/A and GRD officials took steps to address some of the problems identified in this report. 

• The U.S. government has committed to complete as many projects as possible. GRD has 

continued the work via direct contracting with local Iraqi companies and has completed 

many of the projects since Parson’s work was terminated. According to GRD officials’ 

since termination construction has been completed on an additional 68 PHCs and 2 

hospitals. 

• On July 18, 2005, JCC-I/A issued a “letter of concern” to Parsons stating, “This letter of 

concern is issued regarding certain shortfalls and non-compliance issues with quality, 

safety, schedule and performance criteria that must be immediately addressed and 

rectified.” The letter referred to issues raised as a result of a Project and Contracting 

Office (PCO) site visit to PHCs in the Baghdad area. 

• In the Fall of 2005, JCC-I/A assigned an overall interim unsatisfactory performance 

evaluation to the contractor because of unmet milestones, schedule slippages, and elusive 

administrative task order costs. 

• Lacking confidence in the Parsons Global Services, Inc. weekly cost performance reports, 

the contracting officer requested the monthly cost performance reports as prescribed by 

contract section 2.3.5. On October 23, 2005, the government and Parsons agreed upon a 

format for the new reports. Subsequently, Parsons has produced monthly cost 

performance reports in the new format. 

• On October 24, 2005, the contracting officer briefed PCO and Parsons Global Services, 

Inc. that required procedures for “constructive changes” to the project would be enforced. 

The contracting officer required that future constructive changes be properly definitized. 

He also pushed the formal process to bring the outstanding request for equitable 

xviii 
adjustment (REA) to resolution. On December 21, 2005, negotiations commenced to 

reconcile Parsons’ $39 million REA. As of February 24, 2006, 50 of 58 items had been 

resolved for $22 million. An agreement was signed and the task orders were funded. 

The eight remaining items were resolved under a unilateral agreement and the contract 

modification was signed on March 17, 2006. 

• On December 21, 2005, Parsons Global Services, Inc. and the U.S. government 

commenced negotiation regarding Parsons’ submission of excusable delays. An 

agreement was reached and schedules were adjusted in February, 2006. 

• As we previously reported,6

 GRD-PCO and IRMO took steps late in 2005 to improve the 

quality of cost-to-complete reporting. The estimates reported in the December 31, 2005, 

Project Assessment Report for the PHC project appear more realistic than those 

previously reported. Representatives of IRMO and GRD-PCO stated that cost-tocomplete reports are now used more effectively as a project management tool. 

• On February 4, 2006, GRD-PCO convened a teleconference with both U.S. government 

officials and Parsons’ representatives to determine a workable solution for how many 

PHCs should be completed by Parsons and how many PHCs should be descoped. The 

conference led to the plan where Parsons would complete 20 centers by April 3, 2006, 

and the other 121 centers would be descoped. GRD began exploring other avenues to 

complete as many PHCs as possible. 

• As previously noted, the U.S. government has committed to complete as many projects as 

possible. In GRD’s response to this report they stated, as of January, 2008, has turned 

over 74 PHCs to the Ministry of Health, another 17 are in post-construction and an 

additional 39 are in advanced stages of construction. 

 

6

 SIGIR-05-027, “Methodologies for Reporting Cost-to-Complete Estimates”, January 27, 2006. 

xix 
Conclusions and Lessons Learned 

Conclusions 

The government used sound procedures for soliciting and awarding this contract; however, the 

execution suffered from an unstable security environment, lack of adequate project management, 

and limited resources. Overall, the contract accomplished little of what it set out to do. Of the 

eleven task orders for construction; three were completed and eight were terminated for the 

convenience of the government prior to completion. 

Lessons Learned 

The U.S. reconstruction program in Iraq has been an exceedingly difficult undertaking. From the 

beginning, there have been planning and deployment issues resulting in delays in the start-up of 

projects, and increased contractor overhead costs. Rising security problems also made pre-award 

site assessments difficult to perform, created problems in defining project requirements, and, in 

some cases, made project site selection impossible. The security environment also affected the 

delivery of supplies and affected both the government’s ability to successfully oversee its 

contractor’s work and the contractor’s capacity to properly supervise its subcontractors. 

Within this environment it is not unexpected that individual project costs would increase and that 

there would be delays in completing projects. What is not expected, however, is the inability of 

management to remedy problems in a timely manner. In this contract, we have multiple 

problems including task orders in which the statements of work are poorly defined; the 

contractor accepting an unrealistic schedule, falling steadily behind that schedule, and failing to 

accurately report project status; and the government failing to take effective action to remedy the 

problems. While government visits to project sites were clearly difficult, oversight and 

surveillance of service and construction contracts is a fundamental element of acquisition, and is 

the collective responsibility of the requiring and contracting activities. For this particular 

contract, there were clearly problems on both sides. However, SIGIR believes the preeminent 

lesson learned is that the government is responsible for ensuring the contractor satisfies contract 

cost, schedules and performance requirements. 

Management Comments

GRD provide written comments on a draft of this report and stated that it supports the overall 

report. However, GRD expressed concern that the report repeats a number of claims made by 

the contractor during the original audit that were not agreed with by GRD. GRD’s comments are 

printed in their entirety on page 30 of this report. GRD also provided technical comments that 

are addressed in the report where appropriate.

xx 
1 
Appendix A—Scope and Methodology 

This audit report is one in a series of focus financial audits of major prime contractors awarded 

contracts for IRRF reconstruction projects. The objectives of this audit were to assess (1) the 

outcome of work initiated under this contract, and (2) the internal controls used for contract 

management. 

To report the outcome of the contract, we reviewed the basic contract, task orders and 

modifications. We interviewed audit personnel at DCAA and reviewed relevant DCAA audit 

reports. We analyzed reports submitted by Parsons and interviewed Parsons management. We 

also interviewed key personnel at GRD and JCC-I/A. 

Data Collection 

To assess the contractor’s performance, we determined the percentage of work completed by 

Parsons before termination of the contract task orders, using data provided by JCC-I/A, monthly 

contract performance reports submitted by Parsons, and the original objectives in the fourteen 

task order statements of work that we obtained from GRD. The Parsons reports summarized the 

total cost of all task orders grouped by work structure elements. 

To determine the sub-contracting provisions and the extent of work subcontracted, we obtained a 

list of subcontractors, the task order modifications, the provision of subcontracting, and the 

control system designed by Parsons to manage subcontracts. 

To determine the costs associated with the related task orders, obligated and expended, we 

obtained the status of obligations report as of August 16, 2007 generated by the Corps of 

Engineering Financial Management Systems (CEFMS). We analyzed the reports to determine 

either the obligated or disbursed cost for each task order. To determine the controls over the 

costs, we reviewed the relevant DCAA reports and analyzed Parsons monthly performance cost 

reports. We obtained the government’s estimated cost, base fee and award fees and other costs 

for construction, medical equipment, administrative and support services from task order 

modifications that included charts entitled, “Summary of Definitized Price,” which contained 

this information. 

For basic data on the specific projects, their locations, and Unique Requirement Identifier, we 

used GRD’s Resident Management Systems (RMS). 

To determine if health facilities were in use and/or accepted by the Government of Iraq, we 

relied upon a report in the Facilities and Transportation sector folder of GRD which contained 

this information 

Data Deficiencies 

We were unable to obtain data to determine the amount of obligations and disbursements made 

on a specific project, such as a specific primary healthcare center or a hospital. We did, 

however, obtain aggregate obligations and disbursements for each task order from CEFMS. 

2 
Due to security considerations SIGIR did not visit project construction locations during this 

review. However, SIGIR has visited Parsons construction sites on previous projects and 

inspections. 

Use of Computer-Processed Data 

We reviewed obligations and disbursements from CEFMS reports. CEFMS was designed as a 

single entry system that can update, in real time, the general ledger and subsidiary ledgers. In 

CEFMS, as in other financial accounting systems, general ledger amounts should be in 

agreement with and supported by subsidiary ledgers and transactions detail amounts. We did not 

audit CEFMS.7

 

We also reviewed PHC project data taken from the Resident Management System (RMS), which 

is used by GRD. RMS is a quality management and contract administration system designed by 

Resident Engineer to help staff complete their mission. The system provides a method to plan, 

accomplish, and control contract management by integrating job specific requirements, corporate 

technical knowledge, and management policies. We did not audit RMS. 

The percent complete data for the 141 PHCs was provided by JCC-I/A and the Iraq 

Reconstruction Management System (IRMS). IRMS is a master data base and is the interagency 

system used in Iraq for reporting the status of U.S. government funded projects. SIGIR audited 

and reported on IRMS report number SIGIR 06-001, “Management of Iraq Relief and 

Reconstruction Fund Program - Evolution of the Iraq Reconstruction Management System.” 

Prior Coverage 

In conducting this audit, we reviewed applicable reports issued by SIGIR, DCAA, and GAO. 

These reports include: 

Special Inspector General for Iraq Reconstruction (SIGIR): 

Audit Reports 

SIGIR-06-011, Management of the Primary Healthcare Centers Construction Projects (April 28, 

2006). The objectives of the audit were to determine if the contractor was in compliance with 

the terms of the contract or task orders and whether the government representatives were 

complying with general legislative and regulatory guidance concerning contract administration 

and financial management. The effectiveness of the monitoring and controls in place by 

administrative contract officer were evaluated.

Inspection Reports 

SIGIR inspection reports of “Primary Healthcare Centers Numbered: KE-01 (SIGIR PA-06-

043); KE-02 (SIGIR PA-06-042); KE-03 (SIGIR PA-06-046); KE-04 (SIGIR PA-06-045); and 

KE-05 (SIGIR PA-06-044) Kirkuk, Iraq”. 

 

7

 For more information on the reliability of data drawn from CEFMS, see GAO report 01-89 “Significant Weaknesses in Corps of Engineers’ 

Computer Controls”, October, 2000, and GAO follow-up report 02-589 “Corps of Engineers Making Improvements But Weaknesses Continue”, 

June, 2002. 

3 
Government Accountability Office (GAO): 

Rebuilding Iraq: Reconstruction Progress Hindered by Contracting, Security, and Capacity 

Challenges, GAO-07-426T (Washington, D.C., February 15, 2007). 

Rebuilding Iraq: Actions Still Needed to Improve the Use of Private Security Providers, GAO06-865T (Washington, DC, June 13, 2006) 

Rebuilding Iraq: Stabilization, Reconstruction, and Financing Challenges, GAO-06-428T, 

(Washington, DC, February 8, 2006) 

Rebuilding Iraq: Actions Needed to Improve Use of Private Security Providers, GAO-05-737 

(Washington, DC, July 28, 2005).

Rebuilding Iraq: Fiscal Year 2003 Contract Award Procedures and Management Challenges, 

GAO-04-605, June, 2004. 

Defense Contract Audit Agency: 

REPORT NO. 2131– 2005N28000016, January 15, 2005 

REPORT NO. 2131– 2005N28000012, December 21, 2004 

REPORT NO. 2131– 2005N28000003, December 21, 2004 

REPORT NO. 2131– 2004N27000007, October 19, 2004 

4 
Appendix B—The Contracting Process 

The Coalition Provision Authority used competitive procedures resulting in contract award to 

Parsons. The CPA required interested offerors to submit sealed bids, subject to negotiation, by 

February 5, 2004. Thirteen proposals were received with Parsons submitting its bid on the final 

day, February 5, 2004. Subsequent requests for best and final offers were made with Parsons 

submitting its final offer on March 9, 2004. The Source Selection Authority evaluated the offers 

according to Request for Proposals’ established evaluation factors of Technical, Management, 

Past Performance and Cost and selected Parsons as representing the best value to the 

Government. 

The Parsons contract had a cost ceiling of $500 million, consisting of a maximum cost of $425 

million, a base fee of $15 million, and a maximum award fee of $60 million. The base fee was 

established at 3 percent of the contracts allowable costs, and the award fee could be up to12 

percent of the negotiated estimated cost for each task order, as determined by the government’s 

award-fee process. The contract was for a base performance period of two years with three oneyear options. Funding was primarily provided through IRRF; however, the Department of 

Defense’s Overseas Humanitarian, Disaster, and Civic Aid Appropriation provided 

approximately $9.3 million for medical equipment. Table 1 shows the timeline for contract 

award to Parsons. 

Table 1—Parsons Contract Award Timeline 

Date Action 

November 26, 2003 Draft Request for Proposal (RFP) issued 

November 21, 2003 Input from several industries obtained 

December 5, 2003 Limitation of sources to selected countries signed 

January 6, 2006 Final RFP issued 

January 14, 2004 First amendment to RFP issued 

January 20, 2004 Advisory assessment obtained to facilitate sources selection 

January 21, 2004 Pre-Proposal conference held in Washington, DC 

January 27, 2004 Second amendment to RFP issued 

January 29, 2004 Third amendment to RFP issued 

February 5, 2004 The date for proposals closed with 13 proposals received 

February 26, 2007 9 of 13 offerors notified they were outside the competitive range 

Discussions conducted with offerors in the competitive range regarding significant 

weaknesses in their proposals 

March 2-5, 2004 

March 5, 2004 Final proposals revisions requested 

March 9, 2004 Final proposals received from all offerors in the competitive range 

March 25, 2004 Parsons Delaware, Inc. awarded contract W914NS-04-D-0006 

Source United States Army Corps of Engineers

5 
Appendix C—Summaries of Task Orders 

Table 1—Task Order Results: Completions by Parsons 

Task 

Order Original Descriptiona Total Disbursed Completion 

1 Mobilization. $5,940,509 $5,936,192 100% 

2 Renovate Ministry of Industry 

and Minerals buildings. $8,257,981 $8,258,377 100% 

3 Renovate a Baghdad Hospital. $9,585,023 $9,365,516 80% 

4 

Design and construct 41 Primary 

Healthcare Centers in central 

Iraq. Provide equipment. 

$50,594,431 $45,671,168

Construction 83% 

Medical 

Equipment 98% 

5 Repair Ministries of Education 

and Higher Education Complex. $1,115,736 $1,187,575 100% 

6 Rehabilitate 5 hospitals in 

southern Iraq. $16,775,944 $16,235,593 85% 

7 Programmatic support services. $115,846,710 $113,826,387 N/A 

8 Rehabilitate hospitals in south 

central Iraq. $11,066,849 $10,425,089 82% 

9 Rehabilitate a hospital in Anbar. $4,562,774 $4,279,626 90% 

10 Rehabilitate 8 hospitals in 

northern Iraq. $16,182,230 $15,935,975 100% 

11 

Design and construct 49 Primary 

Healthcare Centers in northern 

Iraq. Provide equipment.

$63,717,850 $45,780,825

Construction 67% 

Medical 

Equipment 88% 

12 

Design and construct 60 Primary 

Healthcare Centers in southern 

Iraq. 

Provide equipment. 

$71,718,592 $53,706,323

Construction 56% 

Medical 

Equipment 85% 

13 Rehabilitate 3 hospitals in central 

Iraq. $10,410,685 $8,762,189 85% 

14 Close-out task orders. $2,900,000 $2,718,076 100% 

Totals $388,675,314 $342,088,911

a Although the task orders originally stated 41 PHCs for task order 4 and 49 PHCs for task order 11, documentation from JCC-I/A 

and GRD indicated there were 40 PHCs in task order 4 and 50 PHCs in task order 11. An additional 60 PHCs in Task Order 12, 

brought the total to 150 PHCs. 

Source: SIGIR Analysis, Joint Contracting Command – Iraq/Afghanistan; CEFMS Report, August 15, 2007, United 

States Army Corps of Engineers, Gulf Region Division.

6 
Table 2—Financial Summary of Individual Task Orders (TO)

TO 

Original 

Description 

Estimated 

Cost Base Fee Award Fee Total Obligations Disbursed

1 Mobilization $5,165,810 $250,435 $524,264 $5,940,509 $5,940,509 $5,936,192

2 

Renovate 

Ministry Bldgs 7,331,585 237,490 688,906 8,257,981 8,258,377 8,258,377

3 

Renovate Ibn 

Al Baladi 

Hospital 8,251,610 320,820 1,012,593 9,585,023 9,585,023 9,365,516

4 

Construction & 

equip 41 PHCs 

in central Iraq 48,480,652 1,306,906 806,873 50,594,431 50,069,433 45,671,168

5 

Repair Ministry 

Complex 975,667 28,014 112,055 1,115,736 1,486,587 1,187,575

6 

Rehabilitate 5 

hospitals in 

south 14,569,778 663,929 1,652,237 16,775,944 16,851,572 16,235,593

7 

Programmatic 

support services 105,107,638 3,073,704 7,702,457 115,846,710 115,846,800 113,826,387

8 

Rehabilitate 

south central 

hospitals. 9,802,419 352,307 912,123 11,066,849 11,066,849 10,425,089

9 

Rehabilitate Al 

Ramadi Hospital 4,148,115 132,332 282,327 4,562,774 4,412,859 4,279,626

10 

Rehabilitate 8 

hospitals in 

north Iraq 14,651,023 488,817 1,042,390 16,182,230 16,182,230 15,935,975

11 

Construction & 

equip 49 PHCs 

in north 60,781,051 1,623,337 1,313,462 63,717,850 52,068,182 45,780,825

12 

Construction & 

equip 60 PHCs 

in south 68,243,917 1,907,990 1,566,685 71,718,592 61,350,218 53,706,323

13 

Rehabilitate 3 

central Iraq 

hospitals 9,779,217 315,734 315,734 10,410,685 9,077,923 8,762,189

14 Close out 2,900,000 N/A N/A 2,900,000 3,020,774 2,718,076

Totals $360,188,482 $10,701,815 $17,932,106 $388,675,313 $365,217,336 $342,088,911

a

 Task Order 4 total includes a fixed cost of $312,000 

b

 Task Order 11 total includes a fixed fee of $364,000 and a Non-fee bearing overrun of $2,372,043. 

 PHC = Primary Healthcare Center 

Source: CEFMS Report, August 15, 2007; U.S. Army Corps of Engineers, Gulf Region Division; Joint Contracting Command – 

Iraq/Afghanistan 

7 
Chart 21- Financial Summaries of Individual Task Orders

Financial Summary of Task Orders 

$6 $8 $10

$51

$1

$17

$116

$11

$5

$16

$64

$72

$10

$3

$0

$20

$40

$60

$80

$100

$120

$140

1 2 3 4 5 6 7 8 9 10 11 12 13 14

Millions

Task Order

$ Total Est.Cost 

Obligations

Disbursed

1 Mobilization, 2 Ministry Industry and Minerals, 3 Hospital, 4 Central PHCs, 5 Education Ministries, 6 Southern Hospitals, 7 Programmatic 

Support, 8 South Central Hospitals, 9 Hospital, 10 Northern Hospitals, 11Northern PHCs, 12 Southern PHCs, 13 Central Hospitals, 14 Close-out 

Source: SIGIR Analysis, Joint Contracting Command – Iraq/Afghanistan; CEFMS, U.S. Army Corps of Engineers, Gulf Region 

Division. Data as of August 15, 2007 

8 
 Appendix D—Acronyms 

CEFMS US Corps of Engineers Financial Management Systems 

CPA Coalition Provisional Authority 

DCAA Defense Contract Audit Agency 

GAO Government Accountability Office 

GRD Gulf Region Division 

IRMO Iraq Reconstruction Management Office 

IRMS Iraq Reconstruction Management System 

IRRF Iraq Relief and Reconstruction Fund 

ITAO Iraq Transition Assistance Office 

JCC-I/A Joint Contracting Command – Iraq/Afghanistan 

PCO Project and Contracting Office 

PHC Primary healthcare center 

RMS Resident Management System 

SIGIR Special Inspector General for Iraq Reconstruction 

USACE United States Army Corps of Engineers 

9 
Appendix E—Audit Team Members 

This report was prepared and the review was conducted under the direction of David R. Warren, 

Assistant Inspector General for Audit, Office of the Special Inspector General for Iraq 

Reconstruction. 

The staff members who conducted the audit and contributed to the report include: 

Ron Bonfilio 

Mark Comfort 

Glenn Furbish 

Waheed Nasser 

James Pollard 

Charles Thompson 

10 
Management Comments 

Commanding General, Gulf Region Division 

11 
12 
13 
14 
SIGIR’s Mission Regarding the U.S. reconstruction plans, programs, and 

operations in Iraq, the Special Inspector General for Iraq 

Reconstruction provides independent and objective: 

• oversight and review through comprehensive audits, 

inspections, and investigations 

• advice and recommendations on policies to promote 

economy, efficiency, and effectiveness 

• deterrence of malfeasance through the prevention and 

detection of fraud, waste, and abuse 

• information and analysis to the Secretary of State, the 

Secretary of Defense, the Congress, and the 

American people through Quarterly Reports 

Obtaining Copies of SIGIR 

Reports and Testimonies 

To obtain copies of SIGIR documents at no cost, go to 

SIGIR’s Web site (www.sigir.mil). 

To Report Fraud, Waste, 

and Abuse in Iraq Relief 

and Reconstruction 

Programs 

Help prevent fraud, waste, and abuse by reporting 

suspicious or illegal activities to the SIGIR Hotline: 

• Web: www.sigir.mil/submit_fraud.html 

• Phone: 703-602-4063 

• Toll Free: 866-301-2003 

Congressional Affairs Hillel Weinberg 

Assistant Inspector General for Congressional 

 Affairs 

Mail: Office of the Special Inspector General 

 for Iraq Reconstruction 

 400 Army Navy Drive 

 Arlington, VA 22202-4704 

Phone: 703-428-1059 

Email: hillel.weinberg@sigir.mil 

Public Affairs Kristine R. Belisle 

Director for Public Affairs 

Mail: Office of the Special Inspector General 

 for Iraq Reconstruction 

 400 Army Navy Drive 

 Arlington, VA 22202-4704 

Phone: 703-428-1217 

Fax: 703-428-0818 

Email: PublicAffairs@sigir.mil 

15