OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION

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SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION

January 30, 2007 

MEMORANDUM FOR U.S. AMBASSADOR TO IRAQ 

DIRECTOR, IRAQ RECONSTRUCTION MANAGEMENT OFFICE 

COMMANDING GENERAL, MULTI-NATIONAL FORCE-IRAQ 

COMMANDING GENERAL, JOINT CONTRACTING COMMANDIRAQ/AFGHANISTAN 

COMMANDING GENERAL, GULF REGION DIVISION, 

 U.S. ARMY CORPS OF ENGINEERS 

SUBJECT: Status of Medical Equipment and Other Non-construction Items Purchased for 

Primary Healthcare Centers (SIGIR-06-030) 

We are providing this audit report for your information and use. We performed the audit in 

accordance with our statutory duties contained in Public Law 108-106, as amended, which 

requires that we provide for the independent and objective conduct of audits, as well as 

leadership and coordination of and recommendations on policies designed to promote 

economy, efficiency, and effectiveness in the administration of programs and operations and 

to prevent and detect waste, fraud, and abuse. This report discusses our review of controls 

over and utilization of medical consumables and other non-construction purchases for the 

primary healthcare centers project which has been subject to delay and de-scoping. 

We considered comments received on the draft of this report from the Joint Contracting 

Command-Iraq/Afghanistan and the Gulf Region Division, U.S. Army Corps of Engineers, 

when preparing the final report. The comments were addressed in the report, where 

applicable, and copies of formal agency responses are included in the Management 

Comments section of this report. 

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

please contact Mr. Joseph T. McDermott, Assistant Inspector General for Audit, (703-604-

0982 / joseph.mcdermott@sigir.mil); or Mr. Glenn Furbish (914-360-3573/ 

glenn.furbish@iraq.centcom.mil). For the report distribution, see Appendix C. 

Stuart W. Bowen, Jr. 

 Inspector General 

cc: See Distribution 

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

Executive Summary i 

Introduction 

Background 1 

Objectives 3 

Medical Equipment Sets 4 

Other Non-construction Items 6

Conclusion and Recommendations 8 

Appendices 

A. Scope and Methodology 10 

B. Acronyms 12 

C. Report Distribution 13 

D. Audit Team Members 15 

Management Comments 

Joint Contracting Command-Iraq/Afghanistan 16 

Gulf Region Division, U.S. Army Corps of Engineers 20 
Status of Medical Equipment and Other 

Non-construction Items Purchased for 

 Primary Healthcare Centers

SIGIR-06-030 January 30, 2007

Executive Summary 

Introduction 

In July 2006, the Special Inspector General for Iraq Reconstruction (SIGIR) issued a report on 

medical equipment purchased by Parsons Delaware, Inc., in support of a contract, also issued 

to Parsons, to construct 150 primary healthcare centers (PHC) throughout Iraq.1 The executing 

contractor’s name was changed to Parsons Global Services, Inc., (hereafter Parsons) by a 

contract amendment on April 8, 2005. In addition to the construction, Parsons was to purchase 

150 sets of equipment for the clinics plus one set for a medical training facility (for a total of 

151 sets), install the equipment in each of the PHCs, provide training on the equipment, and 

provide a 12-month warranty, at a definitized cost of $70.4 million. However, between 

September 8, 2005, and March 3, 2006, the U.S. government made a series of decisions to 

cease construction on many of the PHCs and the number of PHCs to be completed by Parsons 

was contractually reduced from 150 to 20 facilities. Although GRD’s contract to construct 

PHC facilities through Parsons was significantly reduced, the overall PHC construction 

requirement remained. GRD procured medical equipment sets based on this overall 

requirement. To its credit, GRD did arrange to have the medical equipment sets, furniture, and 

consumables delivered to storage facilities, thus reducing an extremely high risk of pilferage 

and susceptibility to damage.

The U.S. Army Corps of Engineers, Gulf Region Division (GRD), has since negotiated firmfixed-price contracts for constructing PHCs, and currently expects to complete 136 of them. 

Along with the six PHCs Parsons completed, there are expected to be a total of 142 PHCs (plus 

the training academy for a grand total of 143). 

In April 2006, we issued an interim audit report2 to alert management of concerns we had on 

how that medical equipment would be accepted, stored, secured, and used. Our July report also 

expressed concerns about the effect prolonged storage would have on the equipment warranty 

and identified a “lesson learned” for future contract actions regarding the need to fully examine 

 

1 Review of the Medical Equipment Purchased for the Primary Healthcare Centers Associated with Parsons 

Global Services, Inc., Contract Number W914NS-04-D-0006, (SIGIR-06-025, July 28, 2006). 2 Interim Audit Report on the Review of the Equipment Purchased for Primary Healthcare Centers Associated 

With Parsons Global Services, Contract Number W914NS-04-D-0006 (SIGIR-06-016, April 4, 2006) 

i
the impact that changes to contract terms may have on operational and accountability 

requirements. 

This report updates the status of the medical equipment and discusses our review of controls 

over and use of medical consumables and other non-construction purchases for the PHC 

project, which has been subject to delay and de-scoping. 

Objectives 

We initiated this audit as a review of the medical consumables purchased under contract 

W27P4B-05-A-5018 for the primary healthcare centers. Subsequent work led us to expand the 

scope of the audit to include other supporting, non-construction contracts as well. We thus 

modified the objectives to determine: 

• Were the medical consumables, medical equipment, and other non-construction items 

procured properly controlled? 

• Were the plans for their utilization adjusted based on the delay and/or de-scoping of the 

primary healthcare centers project? 

Results 

At the time of our July 2006 report on medical equipment, 20 of the 151 medical and dental 

equipment sets procured under the Parsons contract were physically located at the sites of 20 

PHCs that were fully or partially constructed by Parsons. Another 115 full or partial sets were 

located at a U.S. government-controlled warehouse located in Abu Ghraib, Iraq. Since then, 15 

additional sets of equipment have been delivered to the warehouse; the total number of sets in 

Abu Ghraib was 130, as of July 30, 2006. The location of one set is unknown. 

Our July 2006 report also stated that no official government receipt, inspection, or acceptance 

function had been performed on any of the medical equipment sets at Abu Ghraib and that 

there were questions about the equipment warranty because of the extended storage. As of 

July 30, 2006, approximately $45 million had been disbursed for the medical equipment Since 

then, GRD, as the program manager of the PHC project, has examined 102 equipment crates 

that were damaged, and opened and inspected 61 of the most damaged. GRD found that all of 

the equipment was accounted for in 59 of the crates, and almost all of the equipment was 

missing in 2 crates. GRD did not test the medical equipment to ensure that it was in working 

order. GRD did not open the remaining crates to inventory the equipment because of concern 

that doing so without a manufacturer’s representative present could void any possible 

remaining warranty; however, GRD did take pictures to document the status of the equipment. 

On January 21, 2007, in response to the draft of this report, the Joint Contracting CommandIraq/Afghanistan (JCC-I/A), the command that procured the medical equipment for GRD, 

informed us that it received a response from one medical equipment manufacturing contractor 

who stated that the manufacturer warranties on equipment are effective for 15 months from the 

invoice date or 12 months from the commissioning date (whichever is sooner). This 

information is consistent with GRD’s January 19, 2007, response to us on the draft of this 

ii
report. GRD’s current plan is to inventory and inspect as they install this equipment at the 

constructed PHCs. 

We identified six other non-construction contracts, awarded to various contractors, with a 

combined value of about $43 million. Of these, three were affected by the termination of the 

PHC construction task orders: 

• a $22.6 million contract for generators, transformers, and cables 

• a $14.4 million contract for PHC furniture 

• a $5.5 million contract for consumable medical supplies3 

Approximately $38 million had been disbursed for these three contracts. GRD and JCC-I/A 

modified the generator/transformer contract to have the contractor store and secure the items 

until required at the PHC sites. GRD and JCC-I/A, however, did not take effective action to 

protect all of the furniture and consumable medical supplies. Specifically: 

• The government contracted for 142 sets of furniture for the PHCs under contract W27P4B05-C-0016. Six sets of furniture were delivered directly to PHC construction sites, 90 sets 

were delivered to the U.S. government-controlled warehouse in Abu Ghraib, and 46 sets 

were delivered to the Iraqi Ministry of Health warehouse in Erbil. JCC-I/A reports that the 

furniture delivered to Abu Ghraib was formally accepted, inventoried, and inspected. 

Damaged items were corrected by the contractor. However, the furniture at Erbil was 

formally accepted for payment purposes but was not inventoried and inspected. The 

furniture at Erbil has also been reported as damaged. The contractor, however, was not 

notified in a timely manner and is refusing to take responsibility for furniture reported 

damaged after delivery. 

• The U.S. government contracted for 118 sets of consumable medical supplies to provide a 

90-day “start-up” supply (approximate) for each PHC. Under contract W27P4B-5-A-5018, 

a total of 112 sets of consumable medical supplies were delivered to both the Abu Ghraib 

warehouse and the Iraqi Ministry of Health warehouse in Erbil. Six sets were delivered 

directly to PHCs under construction. GRD stated that they inventoried these medical 

supplies at Abu Ghraib, but did not open the boxes. At Erbil we found no evidence that the 

U.S. government formally accepted, inventoried, or inspected the items. 

This report also identifies a lesson learned about the need to fully examine the potential impact 

of changes in contract terms on other supporting contracts. In this case, a construction contract 

was terminated, but supporting non-construction items had already been ordered. As a result, 

the U.S. government needed to develop plans to secure items awaiting construction completion 

by new contractors on the project. 

 

 

3

 The remaining three contracts were a $100,000 contract for consumable medical supplies (for expedited 

delivery); a $63,000 contract for copiers and printers; and a $379,000 contract for furniture assembly. 

iii
Recommendations

We recommend that the Commanding General, JCC-I/A, in coordination with the 

Commanding General, GRD, should take these actions: 

1. Conduct a complete inventory and inspection of furniture at the Erbil storage facility as 

soon as practicable. 

2. Using the inventory list of all furniture items currently stored at the Erbil storage facility, 

take appropriate actions to recoup the cost of all items found missing or damaged, or 

determine how this missing or damaged furniture will be replaced. 

3. Conduct a complete inventory and inspection of all of the consumable medical supplies as 

soon as practicable. 

4. Using the inventory list of consumable medical supplies currently stored at both the Abu 

Ghraib and Erbil storage facilities, take appropriate action to recoup the cost of all items 

found missing or damaged or, if the items can not be replaced by the contractor, determine 

how these items will be replaced.

Management Comments and Audit Response 

We received written comments on a draft of this report from JCC-I/A and GRD officials who 

generally concurred with our findings and recommendations. Actions are planned or underway 

to implement the recommendations. The comments received were fully responsive. These 

officials also provided technical comments which we have incorporated in the report where 

appropriate. 

iv
Introduction 

Background

In November 2003, $18.6 billion was appropriated under the Emergency Supplemental 

Appropriations Act for Defense and the Reconstruction of Iraq and Afghanistan (Public Law 

108-106). The law created the Iraq Relief and Reconstruction Fund (IRRF), 

$18.4 billion of the appropriation was designated for Iraq. Projects in the health care sector

include nationwide hospital and clinic improvements, equipment procurement and 

modernization, and construction of a pediatric facility.

In March 2004 the U.S. government awarded contract W914NS-04-D-0006 to Parsons 

Delaware, Inc., to construct, among other things, 150 primary healthcare centers (PHCs) 

throughout Iraq. The executing contractor’s name was changed to Parsons Global Services, 

Inc., (Parsons) by a contract amendment on April 8, 2005. Contract task orders 4, 11, and 12 

provided for the design and construction of the 150 PHCs at a definitized cost of about $88.5 

million. In addition, the three task orders provided for the delivery and installation of medical 

and dental equipment at each center plus one set of equipment for a medical training facility 

(for a total of 151 sets). The medical equipment to be installed at each center includes x-ray 

equipment, hematology analyzer, exam tables, patient beds, defibulator, EEG, ventilator, 

incubator, and other equipment. The dental equipment to be installed at each center includes 

dental chairs, lights, cabinets, instruments, supplies, and other equipment. The total definitized 

cost of the equipment for the 150 PHCs plus a medical training academy is approximately 

$70.4 million. Included in the definitized cost for the medical equipment was the requirement 

for Parsons to install and test the equipment, train clinic personnel on the use of the equipment, 

and provide a 12 month warranty on the installed equipment. 

Between September 8, 2005, and March 3, 2006, the U.S. government made a series of 

decisions to issue stop work orders to Parsons that reduced the total number of PHCs to be 

completed by Parsons from 150 to 20 facilities. The causes and impact are reported in our prior 

audit report, Management of the Primary Healthcare Centers Construction Projects.4

Although GRD’s contract to construct PHC facilities through Parsons was significantly 

reduced, the overall PHC construction requirement remained. GRD procured medical 

equipment sets based on this overall requirement. To its credit, GRD did arrange to have the 

medical equipment sets, furniture, and consumables delivered to storage facilities, thus 

reducing an extremely high risk of pilferage and susceptibility to damage. GRD has since 

negotiated firm-fixed-price contracts for constructing PHCs, and currently expects to complete 

136 of them. Along with the six PHCs Parsons completed, there are expected to be a total of 

142 PHCs (plus the training academy for a grand total of 143). 

 

4

 See Management of the Primary Healthcare Centers Construction Projects (SIGIR-06-011, April 29, 2006). 

1
Prior SIGIR Reports 

In addition to our report on the healthcare center construction project discussed above, we have 

issued two additional audit reports on concerns with the Parsons contract. In March 2006, we 

initiated an audit to determine if medical equipment associated with primary healthcare centers 

was properly accounted for. In April 2006, we issued, Interim Audit Report on the Review of 

Equipment Purchased for Primary Healthcare Centers Associated with Parsons Global 

Services, Contract Number W914NS-04-D-0006 (SIGIR-06-016, April 4, 2006), to alert 

responsible U.S. government agencies of our concerns over certain events that were scheduled 

to occur before our audit was complete and our final report issued. These concerns included: 

(1) the lack of written plans for the acceptance storage, and use of the 131 medical equipment 

sets to be delivered by Parson in April 2006 that were in excess to the current PHC needs as a 

result of reducing the number of PHCs to be constructed from 150 to 20, and the nonconstruction of the medical training academy (whose construction was not part of the Parsons 

contract); (2) the need to ensure U.S. government accountability of the equipment upon 

delivery to the Iraqi Ministry of Health warehouse in Erbil, Iraq by Parsons; and (3) U.S. 

government’s inability to ensure proper protection and accountability of equipment stored in an 

Iraqi warehouse. 

In July 2006, we issued, Review of the Medical Equipment Purchased for the Primary 

Healthcare Centers Associated with Parsons Global Services, Inc., Contract Number W914NS04-D-0006 (SIGIR-06-025, July 28, 2006). This report stated that GRD and JCC-I/A had 

decided not to store any equipment at the Iraqi Ministry of Health warehouse, but to require 

Parsons to deliver all 131 extra equipment sets to the U.S. government-controlled warehouse 

located in Abu Ghraib, Iraq. This decision alleviated our concern over security of the 

equipment if stored in an Iraqi warehouse. The report, however, identified a number of 

additional concerns including (1) neither JCC-I/A nor GRD took appropriate actions to ensure 

that medical equipment delivered to the Abu Ghraib warehouse was properly accepted, 

inspected, and inventoried by any authorized U.S. government representative; (2) a large 

number of the equipment shipping crates had some type of visual damage; and (3) there was a 

question about whether the 12-month warranty provided by Parsons as part of the basic 

equipment purchase contract would continue to apply given the delayed delivery to and 

installation in the PHCs. 

This report updates the status of the medical equipment and discusses our review of controls 

over and use of medical consumables and other non-construction purchases for the PHC 

project, which has been subject to delay and de-scoping. Although GRD’s contract to construct 

PHC facilities through Parsons was significantly reduced, the overall PHC construction 

requirement remained. GRD procured medical equipment sets based on this overall 

requirement. To its credit, GRD did arrange to have the medical equipment sets, furniture, and 

consumables delivered to storage facilities, thus reducing an extremely high risk of pilferage 

and susceptibility to damage.

2
Objectives

We initiated this audit as a review of the medical consumables purchased under contract 

number W27P4B-05-A-5018 for the primary healthcare centers. Subsequent work led us to 

expand the scope of the audit to include other supporting non-construction contracts as well. 

The objectives of this audit were to determine the current status of the medical equipment and 

other non-construction items associated with the primary healthcare centers and to determine if 

there was proper planning for other contracts supporting the PHC project when it was 

terminated. Thus, the objectives of this review were modified to determine: 

• Were the medical consumables, medical equipment, and other non-construction items 

procured properly controlled? 

• Were the plans for the plans for their utilization adjusted based on the delay and/or descoping of the primary healthcare centers project? 

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

Appendix A. For definitions of the acronyms used in this report, see Appendix B. For a 

distribution list of this report, see Appendix C. For a list of audit team members, see Appendix 

D. 

3
Medical Equipment Sets

Our July 28, 2006, report stated that no official government receipt, inspection, or acceptance 

function had been performed on any of the medical equipment sets at Abu Ghraib. We also 

reported that GRD was uncertain about the effect that the delayed delivery and installation at 

PHCs would have on the equipment warranty. Since then, GRD has inspected some damaged 

equipment crates but has been reluctant to inspect the remaining undamaged crates to inventory 

the equipment because of concerns that doing so without a manufacturer’s representative 

present could void any possible warranty remaining. Recently, the Joint Contracting 

Command-Iraq/Afghanistan (JCC-I/A), the command that procured the medical equipment for 

GRD, obtained warranty information from one medical equipment manufacturer.

Medical Equipment Inventory 

At the time of our July 28, 2006 report, 20 of the 151 medical and dental equipment sets 

procured under the Parsons contract were physically located at the sites of 20 PHCs that were 

fully or partially constructed by Parsons. Another 115 full or partial sets were located at a U.S. 

government-controlled warehouse located in Abu Ghraib, Iraq. The warehouse is operated by 

PWC Logistics. Since then, the PWC Logistics automated warehouse system shows that an 

additional 15 sets of equipment have been delivered to the warehouse; the total number of sets 

stored in the Abu Ghraib warehouse was 130, as of July 30, 2006. The location of one set is 

unknown. About $45 million had been disbursed for the medical equipment as of July 30, 

2006. 

Although we recommended that GRD coordinate with JCC-I/A and conduct a complete 

inventory and inspection of all of the medical equipment currently stored in the PWC logistics 

warehouse, as of December 2006, only a limited inspection has been performed. Our concern 

about the condition of the equipment was driven in large part by an inspection we conducted of 

the medical equipment crates in May 2006. That inspection found a large number of heavily 

damaged crates with signs that equipment may be missing. Other crates had signs of rough 

handling during the delivery process which, because of the sensitivity of some of the medical 

equipment, could indicate that equipment was damaged. To its credit, in September 2006, GRD 

conducted an inspection of 102 damaged crates. Of the 102 crates, 41 were not opened because 

the damage to the crates appeared minimal. However, the remaining 61 crates were opened and 

the contents inspected. The inspection found that all of the items were accounted for in 59 of 

the crates, and almost all of the items were missing in 2 crates. GRD did not test the medical 

equipment to ensure that it was in working order. GRD did not open the remaining crates to 

inventory the equipment because of concern that doing so without a manufacturer’s 

representative present could void any possible remaining warranty; however, it did take 

pictures to document the status of the equipment. GRD’s current plan is to open the crates at 

the respective PHCs. 

In responding to a recommendation made in the draft of this report to conduct an inventory and 

inspection as soon as possible, GRD responded that it believes that conducting inventories and 

equipment functionality tests at the warehouse would have limited or no value in determining 

responsibility for missing or broken items. Since the U.S. Government has already received the 

4
materials and equipment, it is already out of supplier or manufacturer control and “after-thefact” inspections at the warehouse would likely be disputed. In addition, in order to test 

equipment for functionality at the warehouse, the items will first have to be uncrated and 

assembled by a professional medical equipment team. Providing adequate connections to the 

necessary infrastructure would be problematic at best and, following testing, the equipment 

would have to be disassembled, re-packaged, and re-crated in order to be shipped to the 

ultimate destination. GRD also provided that it believes that equipment testing in a warehouse 

environment may be confusing or inconclusive, as the results of warehouse testing may be 

inconsistent with the results of tests conducted in an environment where the equipment would 

normally be used. We agree with this plan and modified this recommendation based on the 

inventory actions already taken and planned approach for testing the medical equipment.

Medical Equipment Warranty 

The need to expeditiously account for and inspect the medical equipment is driven by 

uncertainty about the equipment warranty. The Parsons contract required that the medical 

equipment purchased for the PHCs include a 12-month warranty. GRD previously told us that 

it believes that the warranty takes effect upon installation of the equipment in the PHCs. 

However, JCC-I/A has been unable to provide any documentation that describes the precise 

terms of the warranty agreement. The original plan anticipated that medical equipment would 

be delivered directly to the PHCs for installation. In our July 2006 report we expressed our 

concerns about the possible effect that extended storage may have on the warranty and 

recommended that JCC-I/A, in coordination with GRD clarify the warranty status. However, in 

a written response to our follow-up questions, JCC-I/A reported that it is still in the process of 

gathering warranty information from Parsons and has not yet contacted the equipment 

manufacturers. On January 21, 2007, in response to the draft of this report, JCC-I/A informed 

us that it received a response from one medical equipment manufacturing contractor who stated 

that the manufacturer warranties on equipment are effective for 15 months from the invoice 

date or 12 months from the commissioning date (whichever is sooner). This information is 

consistent with GRD’s January 19, 2007, response to us on the draft of this report. 

In our July 2006 report we expressed our concerns about the possible effect that extended 

storage may have on the warranty and recommended that JCC-I/A, in coordination with GRD 

clarify the warranty status. Based on this new information on the warranties being effective for 

15 months from the invoice date, we are still concerned. Installation of what set of medical 

equipment goes where needs to be identified by invoice date as to take advantage of any 

warranties remaining available. 

5
Other Non-construction Items 

We identified six other non-construction contracts, awarded to various contractors, with a 

combined value of about $43 million. Of these three were significantly affected by the 

termination of the PHC construction task orders: 

• a $22.6 million contract for generators, transformers, and cables 

• a $14.4 million contract for PHC furniture 

• a $5.5 million contract for consumable medical supplies 

Approximately $38 million had been disbursed for these three contracts. The three other nonconstruction contracts were a $63,000 contract for copiers and printers; a $100,000 contract for 

consumable medical supplies; and a $378,000 contract for furniture assembly. 

GRD and JCC-I/A modified the generator/transformer contract to have the contractor store and 

secure the items until required at the PHC sites. GRD and JCC-I/A, however, did not take 

effective action to protect all of the furniture and consumable medical supplies. 

Generators, Transformers, and Cables 

JCC-I/A contracted for generators, transformers, and cables for the PHCs under contract 

W27P4B-05-0015. The contract has a value of $22.6 million. As of July 30, 2006, 

$18.0 million had been disbursed; specifically, $6.8 million of total obligations for the 

transformers and $11.2 million (of $15.6 million obligated) for the generators. This contract 

was modified at a cost of $1.3 million to have the contractor store and secure the generators 

and transformers until required at the PHC sites. 

Furniture 

The government contracted for 142 sets of furniture for the PHCs under contract W27P4B-05-

C-0016. The contract has a value of $14.4 million and JCC-I/A reported that all funds on the 

contract had been disbursed. According to JCC-I/A, 6 sets were delivered directly to PHCs, 46 

sets were delivered to the Iraqi Ministry of Health warehouse in Erbil, and 90 sets were 

delivered to the U.S. government-controlled warehouse in Abu Ghraib. JCC-I/A reports that 

the furniture delivered to Abu Ghraib was formally accepted, inventoried and inspected. We 

previously observed that some furniture stored at Abu Ghraib was damaged, including broken 

mirrors and damaged chairs. JCC-I/A told us that all problems were corrected by the 

contractor. However, according to JCC-I/A officials, the furniture at Erbil was formally 

accepted for payment purposes, but was not inventoried or inspected. Approximately four 

weeks after delivery, the Iraqi Ministry of Health notified JCC-I/A of damaged furniture. The 

contractor, however, was not notified in a timely manner and is refusing to take responsibility 

for furniture reported damaged after delivery. According to GRD, it sent two employees to 

Erbil in April 2006 to verify the receipt of the furniture and they determined that a follow-up 

trip would be necessary to fully account for and inspect the goods. However, on November 15, 

2006, GRD informed us that the inspection had not occurred. Because a formal inventory and 

6
inspection process was not followed, the opportunity to obtain compensation from the 

contractor for the damage is at risk 

Consumable Medical Supplies 

A similar situation as exists for the furniture exists for the consumable medical supplies. The 

U.S. government contracted for 118 sets of consumable medical supplies to provide a 90-day 

“start-up” supply (approximate) for each PHC5. Contract W27P4B-5-A-5018, has a value of 

$5.5 million and JCC-I/A reports that all funds on the contract have been disbursed.6

According to GRD, 46 sets were delivered to the Iraqi Ministry of Health warehouse in Erbil 

and 66 sets along with some miscellaneous overages were delivered to the U.S. governmentcontrolled warehouse in Abu Ghraib. Six sets were delivered directly to PHCs under 

construction. GRD stated that they inventoried the medical supplies at Abu Ghraib, but did not 

open the boxes. At Erbil, the consumable supplies were accepted for payment purposes, but 

were not inspected or inventoried. Nonetheless, payment for the supplies was made. GRD 

reports that it sent two employees to Erbil in April 2006 to verify the receipt of the furniture 

and the medical consumables, however, the employees determined that a follow-up trip would 

be necessary. That inspection has not yet taken place. 

 

5

 GRD told us that only 118 sets of consumables were ordered for the 150 PHCs due to funding constraints at the 

time of the order. The expectation was that the quantity of consumables procured would be sufficient for “startup” and that the remaining consumables could be procured later when funding constraints were removed. 

6

 There was also a $100,000 disbursement made (contract W91GET-06-M-1017 for expedited delivery) for 

consumable medical supplies. 

7
Conclusion and Recommendations 

Conclusion 

In April 2006, we issued an interim audit report that expressed our concern about the 

government’s plans to store excess medical equipment sets resulting from GRD’s decision to 

reduce the number of public healthcare centers to be built under the Parson’s contract. In the 

course of our audit we brought our concerns to appropriate U.S. government officials and 

received verbal confirmation that the equipment acceptance and storage issues were being 

worked with all concerned and would be fully coordinated and implemented to ensure 

accountability and effective utilization. As a result, GRD decided not to store equipment in an 

Iraqi-controlled warehouse. In July 2006, we issued our final report on the equipment and 

included a lesson learned regarding the need to fully examine the potential impact that changes 

to contract terms may have on accountability requirements. Little else has been done with this 

equipment since our last report. We believe that the U.S. government needed to develop plans 

to secure items awaiting construction completion by new contractors on the project. 

The medical equipment is in storage at a U.S. government-controlled warehouse, and GRD 

conducted a partial inspection of damaged crates. The remaining crates have not been 

inspected, or inventoried, creating a significant risk that the government will ultimately bear 

responsibility for any missing or damaged items. GRD’s current plan is to inventory and 

inspect as they install this equipment at the constructed PHCs. We agree that this is the best 

course of action. However, in our July 2006 report we expressed our concerns about the 

possible effect that extended storage may have on the warranty and recommended that JCCI/A, in coordination with GRD clarify the warranty status. Based on new information obtained 

by JCC-I/A on the warranties being effective for 15 months from the invoice date or 12 months 

from the commissioning date (whichever is earlier), we are still concerned. Installation of 

what set of medical equipment goes where needs to be identified by invoice date as to take 

advantage of any warranties remaining available. 

We also identified two supporting non-construction contracts, for furniture and consumable 

medical supplies, for which U.S. government agencies did not take appropriate action to 

address the need for an inspection and inventory of the items purchased. As with the medical 

equipment, this creates a risk that the U.S. government will bear responsibility for missing or 

damaged items. 

Recommendations

We recommend that the Commanding General, JCC-I/A, in coordination with the 

Commanding General, GRD, should take these actions: 

1. Conduct a complete inventory and inspection of furniture at the Erbil storage facility as 

soon as practicable. 

8
2. Using the inventory list of all furniture items currently stored at the Erbil storage facility, 

take appropriate actions to recoup the cost of all items found missing or damaged, or 

determine how this missing or damaged furniture will be replaced. 

3. Conduct a complete inventory and inspection of all of the consumable medical supplies as 

soon as practicable. 

4. Using the inventory list of consumable medical supplies currently stored at both the Abu 

Ghraib and Erbil storage facilities, take appropriate action to recoup the cost of all items 

found missing or damaged or, if the items can not be replaced by the contractor, determine 

how these items will be replaced. 

Management Comments and Audit Response 

We received written comments on a draft of this report from JCC-I/A and GRD officials who 

generally concurred with our findings and recommendations. Actions are planned or underway 

to implement the recommendations. The comments received were fully responsive. These 

officials also provided technical comments which we have incorporated in the report where 

appropriate. 

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Appendix A – Scope and Methodology 

In May 2006, we initiated the audit (Project 6018) as a review of the medical consumables 

purchased under contract W27P4B-05-A-5018 for the PHCs, but subsequent work led us to 

expand the scope of the audit to include other non-construction contracts as well. We thus 

modified the objectives to determine (1) if the medical consumables, medical equipment, and 

other non-construction items procured were properly controlled, and (2) if the plans for their 

utilization were adjusted based on the delay and/or de-scoping of the primary healthcare 

centers project. 

To determine the current status of the medical consumables, medical equipment, and other 

non-construction items we reviewed the equipment purchase documentation gathered during 

our earlier review of medical equipment and updated it through interviews of responsible 

GRD, JCC-I/A and Iraq Reconstruction Management Office personnel. We also observed the 

condition of the crates of medical equipment, furniture, and consumables stored at the PWCLogistics warehouse in Abu Ghraib, Iraq, on May 9-10, 2006. We documented many of our 

observations at the warehouse with digital pictures and videos. 

To determine if plans for the utilization of the medical consumables, medical equipment, and 

other non-construction items were adjusted, we interviewed responsible GRD, JCC-I/A and 

Iraq Reconstruction Management Office personnel. 

We performed this audit from May 2006 through November 2006 in accordance with generally 

accepted government auditing standards.

Use of Computer-Processed Data 

We did not use computer-processed data in the performance of this audit. 

Prior Coverage 

Prior reports related to Primary Healthcare Centers issued by the Office of the Special 

Inspector General for Iraq Reconstruction (SIGIR) can be accessed on its website 

http://www.sigir.mil. 

• Review of the Medical Equipment Purchased for the Primary Healthcare Centers 

Associated With Parsons Global Services Inc.,Contract Number W914NS-04-D-0006

(SIGIR-06-025, July 28, 2006), concluded that U.S. government agencies did not take 

appropriate actions to ensure that the medical equipment delivered to the Abu Ghraib 

warehouse was properly inventoried, inspected, or accepted by any authorized 

representative. Therefore, the U.S. government did not know what medical equipment had 

been delivered to the warehouse or the condition of the equipment upon delivery. The 

accountability failure makes determining who has responsibility for missing or damaged 

equipment difficult, if not impossible. 

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

April 29, 2006), concluded overall that management of the primary healthcare centers 

construction projects could have been better executed between March 25, 2004 and early 

July 2005. In July 2005, when government managers recognized that the PHC construction 

program was in trouble, they started a series of actions eventually resulting in a reduction 

in the number of centers to be delivered from the 150 to 20. Approximately 121 centers 

remained partially completed. Because of a strong commitment by both U.S. and Iraqi 

government managers, efforts are under way to identify the required funds to finalize these 

centers for the benefit of the Iraqi citizens. 

• Interim Audit Report on the Review of the Equipment Purchased for Primary Healthcare 

Centers Associated With Parsons Global Services, Contract Number W914NS-04-D-0006

(SIGIR-06-016, April 4, 2006), was issued to alert management to our concerns that certain 

planned events may have on the accountability for and utilization of the medical equipment 

and to provide management timely information on these potential events and the 

opportunity to take corrective actions to reduce the risk of accountability shortfalls 

associated with these events. These concerns included (1) the need to prepare alternative 

plans for the utilization of 131 medical equipment sets to be delivered by Parsons that were 

excess to current PHC needs, (2) the need to ensure U.S. government accountability of the 

equipment upon delivery to the Ministry of Health warehouse at Erbil, and (3) U.S. 

government’s inability to ensure proper protection and accountability of equipment to be 

stored in an Iraqi warehouse. 

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Appendix B – Acronyms 

GRD Gulf Region Division, U.S. Army Corps of Engineers 

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

PHC Primary Healthcare Center 

SIGIR Special Inspector General for Iraq Reconstruction 

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Appendix C – Report Distribution 

Department of State 

Secretary of State 

Senior Advisor to the Secretary and Coordinator for Iraq 

Director of U.S. Foreign Assistance/Administrator, U.S. Agency for International 

Development 

 Director, Office of Iraq Reconstruction 

 Assistant Secretary for Resource Management/Chief Financial Officer, 

 Bureau of Resource Management 

U.S. Ambassador to Iraq 

Director, Iraq Reconstruction Management Office 

Mission Director-Iraq, U.S. Agency for International Development 

Inspector General, Department of State 

Department of Defense 

Secretary of Defense 

Deputy Secretary of Defense 

Under Secretary of Defense (Comptroller)/Chief Financial Officer 

 Deputy Chief Financial Officer 

 Deputy Comptroller (Program/Budget) 

Deputy Assistant Secretary of Defense-Middle East, Office of Policy/International 

Security Affairs 

Inspector General, Department of Defense 

Director, Defense Contract Audit Agency 

Director, Defense Finance and Accounting Service 

Director, Defense Contract Management Agency 

Department of the Army 

Assistant Secretary of the Army for Acquisition, Logistics, and Technology 

Principal Deputy to the Assistant Secretary of the Army for Acquisition, Logistics, 

and Technology 

Deputy Assistant Secretary of the Army (Policy and Procurement) 

Director, Project and Contracting Office 

Commanding General, Joint Contracting Command-Iraq/Afghanistan* 

Assistant Secretary of the Army for Financial Management and Comptroller 

Chief of Engineers and Commander, U.S. Army Corps of Engineers 

 Commanding General, Gulf Region Division* 

Chief Financial Officer, U.S. Army Corps of Engineers 

Auditor General of the Army 

U.S. Central Command

Commanding General, Multi-National Force-Iraq 

Commanding General, Multi-National Corps-Iraq 

Commanding General, Multi-National Security Transition Command-Iraq 

Commander, Joint Area Support Group-Central 

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Other Federal Government Organizations 

Director, Office of Management and Budget 

Comptroller General of the United States 

Inspector General, Department of the Treasury 

Inspector General, Department of Commerce 

Inspector General, Department of Health and Human Services 

Inspector General, U.S. Agency for International Development 

President, Overseas Private Investment Corporation 

President, U.S. Institute for Peace 

Congressional Committees and Subcommittees, Chairman and 

Ranking Minority Member 

U.S. Senate 

Senate Committee on Appropriations 

Subcommittee on Defense 

Subcommittee on State, Foreign Operations and Related Programs 

Senate Committee on Armed Services 

Senate Committee on Foreign Relations 

Subcommittee on International Operations and Terrorism 

Subcommittee on Near Eastern and South Asian Affairs 

Senate Committee on Homeland Security and Governmental Affairs 

Subcommittee on Federal Financial Management, Government Information and 

International Security 

Subcommittee on Oversight of Government Management, the Federal Workforce, and 

the District of Columbia 

U.S. House of Representatives 

House Committee on Appropriations 

Subcommittee on Defense 

Subcommittee on Foreign Operations, Export Financing and Related Programs 

Subcommittee on Science, State, Justice and Commerce and Related Agencies 

House Committee on Armed Services 

House Committee on Government Reform 

Subcommittee on Management, Finance and Accountability 

Subcommittee on National Security, Emerging Threats and International Relations 

House Committee on International Relations 

Subcommittee on Middle East and Central Asia 

*Recipient of the draft audit report. 

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Appendix D – Audit Team Members 

This report was prepared and the review was conducted under the direction of Joseph T. 

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

Iraq Reconstruction. The staff members who contributed to this report include: 

Karen Bell 

Glenn Furbish 

W. Dan Haigler 

William E. Shimp 

Clifton Spruill 

15
Management Comments 

Joint Contracting Command-Iraq/Afghanistan 

16
17
18
19
Management Comments 

Gulf Region Division, U.S. Army Corps of Engineers 

20
21
22
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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 Marthena Cowart 

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: 703-604-0368 

Email: marthena.cowart@sigir.mil 

Public Affairs Denise Burgess 

Assistant Inspector General 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 

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