United States Government Accountability Office

GAO Testimony before the Committee on 

Government Reform, House of 

Representatives

REBUILDING IRAQ 

Continued Progress 

Requires Overcoming 

Contract Management 

Challenges 

Statement of Katherine V. Schinasi, Managing Director, 

Acquisition and Sourcing Management 

For Release on Delivery

Expected at 10:00 a.m. EDT 

Thursday, September 28, 2006 

 

GAO-06-1130T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

September 28, 2006

REBUILDING IRAQ

Continued Progress Requires 

Overcoming Contract Management 

Challenges 

Highlights of GAO-06-1130T, a testimony 

to the Committee on Government Reform, 

House of Representatives

The United States, along with its 

coalition partners and various 

international organizations, has

undertaken a challenging, complex, 

and costly effort to stabilize and 

rebuild Iraq. The Department of

Defense (DOD) has responsibility

for a significant portion of the 

reconstruction effort. 

Amid signs of progress, the 

coalition faces numerous political, 

security, and economic challenges 

in rebuilding Iraq. Within this 

environment, many reconstruction 

projects have fallen short of 

expectations, resulting in increased 

costs, schedule delays, reduced

scopes of work, and in some cases 

project cancellations. 

This testimony (1) discusses the 

overall progress that has been 

made in rebuilding Iraq and 

(2) describes challenges faced by

DOD in achieving successful

outcomes on individual projects. 

This testimony reflects our reviews 

of reconstruction and DOD 

contract management issues, as

well as work of the Special

Inspector General for Iraq 

Reconstruction. 

In our previous reports, we have 

made several recommendations to 

improve outcomes in Iraq. DOD 

generally agreed with our

recommendations. 

Overall, the United States generally has not met its goals for reconstruction 

activities in Iraq with respect to the oil, electricity, and water sectors. As of 

August 2006, oil production is below the prewar level, and the restoration of 

electricity and new or restored water treatment capacity remain below 

stated goals. One-third of DOD’s planned construction work still needs to be 

completed and some work is not planned for completion until late 2008. 

Continuing violence in the region is one of the reasons that DOD is having 

difficulty achieving its goals. 

The contracting challenges encountered in Iraq are emblematic of systemic 

issues faced by DOD. When setting requirements for work to be done, DOD 

made assumptions about funding and time frames that later proved to be 

unfounded. The failure to define realistic requirements has had a cascading

effect on contracts and has made it difficult to take subsequent steps to get 

successful outcomes. For example, in the absence of settled requirements, 

agencies sometimes rely on what are known as undefinitized contract 

actions, which can leave the government exposed to increased costs. 

Further, DOD lacked the capacity to provide effective oversight and manage 

risks. We also found that DOD, at times, improperly used interagency 

contracts and was not able to take advantage of full and open competition 

during the initial stages of reconstruction. Just as multiple factors contribute 

to success or failure, multiple actors play a role in achieving successful 

acquisition outcomes, including policy makers, program managers, 

contracting officers, and the contractors themselves. 

www.gao.gov/cgi-bin/getrpt?GAO-06-1130T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Katherine V. 

Schinasi at (202) 512-4841 or 

schinasik@gao.gov. 
Mr. Chairman and Members of the Committee: 

I am pleased to be here today to discuss the contracting challenges the 

Department of Defense (DOD) faces in achieving successful acquisition 

outcomes in its efforts to stabilize and rebuild Iraq. The United States, 

along with its coalition partners and various international organizations, 

has undertaken a challenging and costly effort to stabilize and rebuild Iraq. 

This enormous effort is taking place in an unstable security environment, 

concurrent with Iraqi efforts to transition to a permanent government, and 

relies heavily on private companies for success. DOD has responsibility for 

a significant portion of the reconstruction efforts and has awarded and 

managed many of the large reconstruction contracts, such as contracts to 

rebuild Iraq’s oil, water, and electrical infrastructure. 

As we have previously noted, amid signs of progress, the coalition faces 

numerous political, security, and economic challenges in rebuilding Iraq.1

For example, our recent assessment of the security situation in Iraq found

that the conditions have deteriorated and grown more complex, as 

evidenced by the increased number of attacks and growing sectarian 

violence. Within this environment, many reconstruction projects have 

fallen short of expectations, resulting in increased costs, schedule delays, 

reduced scopes of work, and in some cases project cancellations. Poor 

acquisition outcomes are not unique to Iraq; we designated DOD’s contract 

management activities as a high-risk area more than a decade ago. In our 

January 2005 high-risk report, we noted that DOD needs to use sound 

business practices when buying goods and services and have the right 

skills and capabilities in its acquisition workforce to properly manage 

these acquisitions.2

Today, I will briefly discuss the overall progress that has been made in 

rebuilding Iraq and then describe challenges faced by DOD in achieving 

successful outcomes on individual projects. This information is based on 

completed and ongoing reviews of efforts to rebuild Iraq that we have 

undertaken since 2003, as well as our work related to selected DOD 

 1

GAO, Rebuilding Iraq: Governance, Security, Reconstruction, and Financing 

Challenges, GAO-06-697T (Washington, D.C.: Apr. 25, 2006); GAO, Rebuilding Iraq: More

Comprehensive National Strategy Needed to Help Achieve U.S. Goals and Overcome 

Challenges, GAO-06-953T (Washington, D.C.: Jul. 11, 2006); and GAO, Stabilizing Iraq: An

Assessment of the Security Situation, GAO-06-1094T (Washington, D.C.: Sep. 11, 2006). 

2

GAO, High-Risk Series: An Update, GAO-05-207 (Washington, D.C.: January 2005). 

Page 1 GAO-06-1130T 
contract management issues. We conducted our reviews in accordance 

with generally accepted government auditing standards. In our previous 

reports, we have made several recommendations to improve outcomes in 

Iraq. DOD generally agreed with our recommendations. 

My statement also considers the work of the Special Inspector General for 

Iraq Reconstruction, including audits of specific projects and lessons 

learned reports. We and other accountability organizations coordinate our 

oversight efforts with those conducted by the Inspector General to avoid

duplication and maximize resources. In that regard, the Inspector 

General’s ability to provide in-country oversight of specific projects and 

reconstruction challenges has enabled us to focus on national, sector, and 

interagency issues. 

Overall, the United States generally has not met its goals for 

reconstruction activities in Iraq with respect to the oil, electricity, and

water sectors. As of August 2006, oil production was below the prewar 

level, and the restoration of electricity and new or restored water 

treatment capacity remained below stated goals. One-third of DOD’s 

planned construction work still needs to be completed and some work is 

not planned for completion until late 2008. Continuing violence is one of 

the reasons that DOD is having difficulty achieving its goals. 

The contracting challenges encountered in Iraq are emblematic of 

systemic issues faced by DOD. When setting requirements for work to be 

done, DOD made assumptions about funding and time frames that later 

proved to be unfounded. The failure to define realistic requirements has 

had a cascading effect on contracts and has made it difficult to take 

subsequent steps to get successful outcomes. For example, in the absence 

of settled requirements, DOD sometimes relied on what are known as 

undefinitized contract actions, which can leave the government exposed 

to increased costs. Further, DOD lacked the capacity to provide effective 

oversight and manage risks. We also found that DOD, at times, improperly 

used interagency contracts and did not take advantage of full and open

competition during the initial stages of reconstruction. 

The contracting processes, activities, and challenges associated with 

rebuilding Iraq can be viewed as similar to, albeit more complicated than, 

those DOD normally confronts. We and others have already reported on 

the large and continuing drain on reconstruction dollars to meet 

unanticipated security needs. Further, multiple players with diffuse and 

Summary 

Background 

Page 2 GAO-06-1130T 
changing responsibilities have had large roles in rebuilding Iraq, 

complicating lines of authority and accountability. Additionally, rebuilding 

a nation after decades of neglect and multiple wars is an inherently 

complex, challenging, and costly undertaking. 

From May 2003 through June 2004, the Coalition Provisional Authority 

(CPA), led by the United States and the United Kingdom, was the United 

Nations recognized authority responsible for the temporary governance of 

Iraq and for overseeing, directing, and coordinating reconstruction efforts. 

During 2003, several agencies, most notably the U.S. Agency for 

International Development (USAID) and the U.S. Army Corps of 

Engineers, played a role in awarding and managing initial reconstruction 

contracts. To coordinate and manage the $18.4 billion in reconstruction 

funding provided in fiscal year 2004, the CPA established a multi-tiered 

contracting approach for Iraq reconstruction activities. The CPA, through 

various military organizations, awarded the following contracts: 1 program 

management support contract to oversee reconstruction efforts; 6 sector 

program management contracts to coordinate reconstruction efforts 

specific to each sector; and 12 design-build contracts to execute specific 

construction tasks. DOD is now emphasizing greater use of local Iraqi 

firms to perform reconstruction work that was previously intended to be

performed by the design-build contractors. 

With the establishment of Iraq’s interim government in June 2004, the 

CPA’s responsibilities were transferred to the Iraqi government or to U.S. 

agencies. The Department of State is now responsible for overseeing U.S. 

efforts to rebuild Iraq. The Project and Contracting Office (PCO), a 

temporary DOD organization, was tasked with providing acquisition and 

project management support. In December 2005, DOD merged the PCO 

with the U.S. Army Corps of Engineers Gulf Region Division, which now 

supervises DOD reconstruction activities in Iraq. Additionally, the State 

Department’s Iraq Reconstruction and Management Office is responsible 

for strategic planning and for prioritizing requirements, monitoring 

spending, and coordinating with the military commander. USAID 

continues to award its own contracts, which are generally associated with 

economic assistance, education and governance, and certain

infrastructure projects. 

Page 3 GAO-06-1130T 
The United States has made some progress in restoring Iraq’s essential 

services, but as of August 2006, such efforts generally have not met prewar 

production levels or U.S. goals. Reconstruction activities have focused on

restoring essential services, such as refurbishing and repairing oil 

facilities, increasing electrical generating capacity, and restoring water 

treatment plants. About one-third of DOD’s construction work remains, 

and DOD estimates that some work is not planned for completion until 

late 2008. Continued violence, however, may make it difficult for the 

United States to achieve its goals. 

U.S. Efforts Have 

Produced Mixed 

Results in Restoring 

Iraq’s Essential 

Services 

For August 2006, the U.S. embassy reported that the oil, electricity, and 

water sectors generally performed below the planned U.S. goals. 

Specifically,

• Crude oil production capacity was reported as about 2.4 million barrels 

per day (mbpd), below the prewar level of 2.6 mbpd and the desired 

goal of 3 mbpd. 

• In the electricity sector, peak generation capacity was reported at 

4,855 megawatts, above the prewar level of 4,300 megawatts, but below 

the U.S. goal of 6,000 megawatts. Further, the current demand for 

power continues to outstrip the available supply of electricity as more 

Iraqis purchase consumer items and devices requiring electricity to 

operate. 

• In the water sector, new or restored treatment capacity was reported at 

about 1.44 million cubic meters per day, compared to the U.S. goal of

2.4 million cubic meters.3

According to senior CPA and State officials responsible for the U.S. 

strategy, the CPA’s 2003 reconstruction plan assumed that (1) creating or 

restoring basic essential services for the Iraqi people took priority over 

jobs creation and the economy and (2) the United States should focus on

long-term infrastructure projects because of the expertise the United 

States could provide. Further, the strategy assumed that reconstruction 

efforts would take place in a relatively benign environment. The difficult 

security environment and persistent attacks on U.S.-funded infrastructure, 

among other challenges, contributed to project delays, increased costs, 

and canceling or reducing the scope of some reconstruction projects. As 

 3

The data for the water sector is as of September 18, 2006.

Page 4 GAO-06-1130T 
we reported on September 11, 2006, the overall security conditions have 

grown more complex, as evidenced by increased numbers of attacks and 

Sunni/Shi’a sectarian strife. The continuing violence may make it difficult

for the United States to achieve its goals. 

The contracting challenges encountered in Iraq are emblematic of 

systemic issues faced by DOD. A fundamental prerequisite to having good

outcomes is a match between well-defined requirements and available 

resources. At the sector, program, and project levels, the failure to define 

realistic requirements has had a cascading effect on contracts and made it 

difficult to take subsequent steps necessary to get to successful outcomes. 

For example, in the absence of settled requirements, DOD has sometimes 

relied on what are known as undefinitized contractual actions, which were 

used extensively in Iraq and can leave the government exposed to 

increased costs. Managing risks when requirements are in flux requires 

effective oversight, but DOD lacked the capacity to provide a sufficient 

acquisition workforce, thereby hindering oversight efforts. In Iraq, as 

elsewhere, we found instances in which DOD improperly used interagency 

contracts to meet reconstruction needs. Finally, the underlying market 

discipline offered by competition can help promote better outcomes, but 

DOD, like other agencies, was challenged, particularly early on, in its 

ability to realize the benefits of competition. One or more of these factors 

can contribute to unsatisfactory outcomes on individual projects; the net 

effect, however, is that many reconstruction projects did not achieve their 

intended goals and DOD has incurred unanticipated costs and schedule 

delays. 

Iraq Contracting 

Challenges Reflect 

Systemic Issues 

Faced by DOD 

Matching Requirements 

with Available Resources 

One of the factors that can contribute to poor DOD acquisition outcomes 

is the mismatch between wants, needs, affordability, and sustainability. 

This mismatch was evident in the reconstruction efforts in Iraq. U.S. 

reconstruction goals were based on assumptions about the money and

time needed, which have proven unfounded. U.S. funding was not meant 

to rebuild Iraq’s entire infrastructure, but rather to lay the groundwork for 

a longer-term reconstruction effort that anticipated significant assistance 

from international donors. 

To provide that foundation, the CPA allocated $18.4 billion in fiscal year 

2004 reconstruction funds among various projects in each reconstruction 

sector, such as oil, electricity, and water and sanitation. As noted by the 

Special Inspector General, almost immediately after the CPA dissolved, 

the Department of State initiated an examination of the priorities and 

Page 5 GAO-06-1130T 
programs with the objectives of reprioritizing funding for projects that 

would not begin until mid- to late-2005 and using those funds to target key 

high-impact projects. By July 2005, the State Department had conducted a 

series of funding reallocations to address new priorities, including 

increasing support for security and law enforcement efforts and oil 

infrastructure enhancements. One of the consequences of these 

reallocations was to reduce funding for the water and sanitation sector by

about 44 percent, from $4.6 billion to $2.6 billion. One reallocation of 

$1.9 billion in September 2004 led the PCO to cancel some projects, most 

of which were planned to start in mid-2005. Changes, even those made for 

good reasons, make it more difficult to manage individual projects to 

successful outcomes. 

Further, such changes invariably have a cascading effect on individual 

contracts. To produce desired outcomes within available funding and 

required time frames, DOD and its contractors need to have a clear 

understanding of reconstruction objectives and how they translate into 

the terms and conditions of a contract: what goods or services are needed, 

when they are needed, the level of performance or quality desired, and 

what the cost will be. When such requirements were not clear, DOD often 

entered into contract arrangements on reconstruction efforts that posed 

additional risks. For example, 

• In June 2004, we reported that faced with uncertainty as to the full 

extent of the rebuilding effort, DOD often authorized contractors to 

begin work before key terms and conditions, including the work to be 

performed and its projected costs, were fully defined.4

 The use of 

undefinitized contract actions, while allowing needed work to begin 

quickly, can result in additional costs and risks to the government. We 

found that as of March 2004, about $1.8 billion had been obligated on

reconstruction contract actions without DOD and the contractors 

reaching agreement on the final scope and price of the work. In one 

case, we found a contract action that had been modified nine times 

between March and September 2003, increasing estimated costs from 

$858,503 to about $204.1 million without DOD and the contractor 

reaching agreement on the scope of work or final price. 

• In September 2005, we reported that difficulties in defining the cost, 

schedule, and work to be performed associated with projects in the 

 4

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

Challenges, GAO-04-605 (Washington, D.C.: Jun. 1, 2004). 

Page 6 GAO-06-1130T 
water sector contributed to project delays and reduced scopes of 

work.5

 We reported that DOD had obligated about $873 million on 

24 task orders to rebuild Iraq’s water and sanitation infrastructure, 

including municipal water supplies, sewage collection systems, dams, 

and a major irrigation project. We found, however, that agreement 

between the government and the contractors on the final cost, 

schedule, and scope of 18 of the 24 task orders we reviewed had been 

delayed. These delays occurred, in part, because Iraqi authorities, U.S. 

agencies, and contractors could not agree on scopes of work and 

construction details. For example, at one wastewater project, local 

officials wanted a certain type of sewer design that increased that 

project’s cost. 

• Earlier this week, we issued a report on how DOD addressed issues 

raised by the Defense Contract Audit Agency (DCAA) in audits of Iraqrelated contract costs.6

 We again noted that DOD frequently authorized 

contractors to begin work before reaching agreement on the scope or 

price of the work. In such cases, we found that DOD contracting 

officials were less likely to remove costs questioned by DCAA from a 

contractor’s proposal when the contractor had already incurred these 

costs. For example, of the 18 audit reports we reviewed, DCAA issued 

11 reports on contract actions where more than 180 days had elapsed 

between the beginning of the period of performance to final 

negotiations. For 9 of these audits, the period of performance DOD 

initially authorized for each contract action concluded before final 

negotiations took place. In one case, DCAA questioned $84 million in 

its audit of a task order proposal for an oil mission. In this case, the 

contractor did not submit a proposal until a year after the work was 

authorized, and DOD and the contractor did not negotiate the final 

terms of the task order until more than a year after the contractor had 

completed work (see fig. 1). In the final negotiation documentation, the 

DOD contracting official stated that the payment of incurred costs is 

required for cost-type contracts, absent unusual circumstances. In 

contrast, in the few audit reports we reviewed where the government 

negotiated prior to starting work, we found that the portion of

questioned costs removed from the proposal was substantial. 

 5

GAO, Rebuilding Iraq: U.S. Water and Sanitation Efforts Need Improved Measures for 

Assessing Impact and Sustained Resources for Maintaining Facilities, GAO-05-872 

(Washington, D.C.: Sep. 7, 2005). 

6

GAO, Iraq Contract Costs: DOD Consideration of Defense Contract Audit Agency’s

Findings, GAO-06-1132 (Washington, D.C.: Sep. 25, 2006). 

Page 7 GAO-06-1130T 
Figure 1: Timeline of Key Contracting Events for Restore Iraqi Oil Contract, Task Order 5 

Source: GAO analysis of DOD data.

J

2003 2004

F MAM J J AS O ND J F MAM J

2005

J AS O ND J FM MJJ A A OND J S

Contract 

proposal

May 5

DCAA

Audit report

Oct 8

Revised

contract 

proposal

Nov. 23

Revised 

contract 

proposal 

Jan. 21

DCAA

Audit report

Jan. 11

Negotiations

Jul. 29

Price 

negotiation

memo

Sept. 9

DCAA

Audit report

Feb. 25

DCAA

Audit report 

Apr. 16

Period of performance:

May 4, 2003–December 24, 2003

Notice to proceed

May 4

Oversight and Workforce 

Issues 

Instability—such as when wants, needs, and contract requirements are in a 

state of flux—requires greater attention to oversight, which in turn relies 

on a capable government workforce. Managing the attendant risks in 

unstable situations grows in both importance and difficulty. Unfortunately, 

attention to oversight and a capable government workforce has not always

been evident during the reconstruction effort. Such workforce challenges

are not unique to Iraq. DOD’s civilian workforce shrank by about 

38 percent between fiscal years 1989 and 2002, but DOD performed this 

downsizing without ensuring that remaining staff had the specific skills 

and competencies needed to accomplish future DOD missions. In other 

cases, contractors have taken over support positions that were 

traditionally filled by government personnel. For example, a contractor 

began providing intelligence support to the Army in Germany in 1999 and 

deployed with the Army to Iraq in 2003. The Army, however, found itself 

unprepared for the volume of Iraqi detainees and the need for 

interrogation and other intelligence and logistics services. 

Page 8 GAO-06-1130T 
We and others have reported on the impact of the lack of adequate 

acquisition personnel and high turnover rates on reconstruction efforts. 

For example, among the lessons learned identified by the Special 

Inspector General was that one of the CPA’s critical personnel 

shortcomings was the inadequate link between position requirements and 

necessary skills. In this case, gaps existed in the experience levels of those 

hired, as well as in the quality and depth of their experiences relative to 

their assigned jobs. Similarly, in January 2004, an interagency assessment 

team was sent to Iraq to review the CPA’s contracting capability. The team 

found that existing contracting personnel were insufficient to handle the 

increased workload that was expected with the influx of fiscal year 2004 

reconstruction funding and that the CPA needed more individuals with 

acquisition expertise who could help the programmatic side of the 

operation. In part, the CPA’s decision to award seven contracts in early 

2004 to help better coordinate and manage the fiscal year 2004

reconstruction efforts was in recognition of this shortfall. As a result, DOD 

finds itself in the position of relying on contractors to help manage and

oversee the work of other contractors. 

At the contract level, having personnel who are trained to conduct 

oversight, assigned at or prior to contract award, and held accountable for

their oversight responsibilities is essential for effective oversight. Our 

work has shown that if oversight is not conducted, is insufficient, or is not 

well documented, DOD, and other reconstruction agencies, risk not 

identifying and correcting poor contractor performance in a timely manner 

and paying contractors more than the value of the services they perform.7

For example, 

• Our June 2004 report found that early contract administration 

challenges were caused, in part, by the lack of sufficient personnel.8

 

We found that, due to the lack of government personnel to provide 

oversight, one contractor may have purchased $7 million in equipment 

and services that were not specifically authorized under the contract. 

Similarly, on another contract, to provide subject matter experts to the 

CPA and Iraqi ministries, DOD officials stated that some experts failed 

to report to duty or when they did, did not perform as expected. DOD 

officials attributed such performance issues to the lack of personnel to 

provide oversight when the experts arrived in Iraq. 

 7

GAO, Contract Management: Opportunities to Improve Surveillance on Department of 

Defense Service Contracts, GAO-05-274 (Washington, D.C.: Mar. 17, 2005).

8

GAO-04-605. 

Page 9 GAO-06-1130T 
• In July 2005, we noted that USAID obligated an additional $33 million 

on one of its contracts to pay for unanticipated increases in security 

costs, which left it short of funds to pay for construction oversight and 

quality assurance efforts, as well as to fund administrative costs.9

 

• Our September 2005 report on water and sanitation efforts found that 

frequent staff turnover affected both the definitization process and the 

overall pace and cost of reconstruction efforts.10 For example, new 

contracting officers had to be brought up to speed and would

sometimes ask the contractor to resubmit information in formats 

different from those previously required. A PCO official also noted that 

the contracting office in Iraq lacked sufficient staff and equipment and 

that some of the staff assigned as contracting officers lacked 

experience with the type of projects the PCO managed. 

Using Interagency 

Contracting Vehicles 

Another area in which workforce shortfalls proved problematic was in 

DOD’s use and management of interagency contracting vehicles. We 

identified management of interagency contracting as a high-risk area in 

January 2005. In recent years, federal agencies have been making a major 

shift in the way they procure many goods and services. Rather than 

developing and awarding their own contracts, agencies are making greater 

use of contracts already awarded by other agencies, referred to as 

interagency contracting. This practice offers the benefits of improved 

efficiency and timeliness. Such contracts, however, need to be effectively

managed, and their use demands a higher than usual degree of business 

acumen and flexibility on the part of the acquisition workforce. Our work 

and that of some agency inspectors general found instances of improper 

use of interagency contracting, resulting from increasing demands on the 

acquisition workforce, insufficient training, inadequate guidance, an

inordinate focus on meeting customer demands at the expense of 

complying with sound contracting policy and required procedures, and the 

lack of clear lines of responsibility and accountability. 

During the initial stages of reconstruction, we and the DOD Inspector 

General found instances in which DOD improperly used interagency 

contracts for many of the same reasons. For example, 

 9

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

GAO-05-737 (Washington, D.C.: Jul. 28, 2005).

10GAO-05-872. 

Page 10 GAO-06-1130T 
• In March 2004, the DOD Inspector General reported that a review of 

24 contract actions awarded by a DOD component on behalf of the 

CPA revealed that DOD circumvented contracting rules, including 

improperly using General Services Administration federal supply 

schedule contracts and improperly contracting for personal services.11

The Inspector General attributed this condition to the need to quickly 

award contracts and to DOD’s failure to plan for the acquisition 

support the CPA needed to perform its mission. 

• In June 2004, we noted that a task order awarded by the Air Force to 

provide logistical support and equipment to support USAID’s mission 

in Baghdad and at other sites in Iraq was, in part, outside the scope of 

the contract.12 The Air Force indicated that it was issuing additional 

guidance to ensure that future task orders were within the scope of the 

contract. 

• In April 2005 we reported that a lack of effective management 

controls—in particular insufficient management oversight and a lack of 

adequate training—led to breakdowns in the issuance and 

administration of task orders for interrogation and other services by 

the Department of the Interior on behalf of DOD.13 These breakdowns 

included 

• issuing 10 out of 11 task orders that were beyond the scope of 

underlying contracts, in violation of competition rules; 

• not complying with additional DOD competition requirements when 

issuing task orders for services on existing contracts; 

• not properly justifying the decision to use interagency contracting; 

• not complying with ordering procedures meant to ensure best value 

for the government; and 

• not adequately monitoring contractor performance. 

 11Office of the Inspector General, Department of Defense. Acquisition: Contracts Awarded 

for the Coalition Provisional Authority by the Defense Contracting Command–

Washington. (Report No. D-2004-057, Arlington, Virginia, Mar. 18, 2004). 

12GAO-04-605. 

13GAO, Interagency Contracting: Problems with DOD’s and Interior’s Orders to Support 

Military Operations, GAO-05-201 (Washington, D.C.: Apr. 29, 2005). 

Page 11 GAO-06-1130T 
Because officials at Interior and the Army responsible for the orders did 

not fully carry out their roles and responsibilities, the contractor was 

allowed to play a role in the procurement process normally performed by 

the government. Further, the Army officials responsible for overseeing the 

contractor, for the most part, lacked knowledge of contracting issues and 

were not aware of their basic duties and responsibilities. 

Finally, one tool that can help mitigate acquisition risks is to rely on the 

discipline provided by market forces when contracts are awarded under 

full and open competition—that is, when all responsible prospective 

contractors are afforded the opportunity to compete. During the initial 

stages of reconstruction, we found that agencies were unable to take full

advantage of competition, in part because of the relatively short time—

often only weeks—to award the first contracts. Our June 2004 report 

found that agencies generally complied with applicable requirements for 

competition when awarding new contracts but did not always do so when 

issuing task orders against existing contracts. We found that 7 of the 

11 task orders we reviewed were for work that was, in whole or in part, 

outside the scope of the existing contracts. In each of these cases, the outof-scope work should have been awarded using competitive procedures or 

supported with a justification and approval for using other than full and 

open competition in accordance with legal requirements. Given the urgent

need for reconstruction efforts, we noted that the authorities under the 

competition laws provided agencies ample latitude to justify their 

approach. 

Such latitude presupposes that the rationale for such actions is valid; if 

not, then the loss of the benefits from competition cannot be easily 

justified. For example, in November 2005, we sustained a protest of a solesource contract awarded by the Air Force in December 2004 for bilingualbicultural advisers that was placed under an environmental services 

contract, which, on its face, did not include within its scope the bilingualbicultural adviser requirement.14 We concluded that the agency’s efforts 

were so fundamentally flawed as to indicate an unreasonable level of

advance planning. In the same decision, we sustained a protest of a 

second, follow-on sole-source contract awarded by the Air Force in July 

2005 to the same company, in which the justification and approval 

prepared in support of the contract was premised on the conclusion that 

the contractor was the only responsible source, yet the capabilities of 

Initial Inability to Benefit 

from Competition 

 14WorldWide Language Resources, Inc., B-296984, Nov. 14, 2005, 2005 CPD P 206. 

Page 12 GAO-06-1130T 
other firms were not in fact considered. The lack of advance planning, the 

failure to meaningfully consider other sources, and the attempts to justify 

the use of sole-source contracts originated, in large part, from the desire 

and pressure to meet the customer’s needs in a short time frame. At the 

time of our decision, the initial contract was substantially complete, but 

we recommended that the agency promptly obtain competition for the 

requirement or prepare a properly documented and supported justification 

and approval for the second contract. 

Overall, the Special Inspector General has reported that competition has 

improved for Iraq reconstruction projects since the early reconstruction 

efforts. Next month we will issue a congressionally mandated report that 

will provide an assessment of competition for actions subsequent to our 

June 2004 report. 

The reconstruction contracting problems we and others have reported on

over the last several years are emblematic of contracting problems we 

have identified in numerous other situations but with more dramatic 

consequences for failure, as the nature of the task for the United States is 

so large and so costly. While some of the factors I discussed today—

mismatches between needs, wants, affordability, and sustainability; 

oversight and workforce challenges; improper use of contracting 

approaches; and competition issues—were more prevalent in the initial 

stages of reconstruction, the risks posed by others have not yet been fully 

mitigated. Understanding not just where we are today, but why, is 

important to enable DOD to make corrections and prevent repeating 

mistakes. 

Just as multiple factors contribute to success or failure, multiple actors 

play a role in achieving successful acquisition outcomes, including policy 

makers, program managers, contracting officers, and the contractors 

themselves. 

Looking to the future, about one-third of DOD’s planned construction 

work remains to be completed, including some work that is not planned 

for completion until the end of 2008. It is not too late for DOD to learn 

from its past difficulties and provide adequate oversight on these 

remaining projects. Delivering these projects on time and within cost is 

essential if we are to maximize the return on this investment and make a 

difference in the daily lives of the Iraqi people and help to provide the 

services they need—safe streets, clean water, reliable electricity, and

affordable health care. 

Conclusions 

Page 13 GAO-06-1130T 
- - - - - 

Mr. Chairman and members of the committee, this concludes my prepared 

statement. I will be happy to answer any questions you may have. 

In preparing this testimony, we relied primarily on our completed and 

ongoing reviews of efforts to rebuild Iraq that we have undertaken since

2003, as well as our work related to selected DOD contract management 

issues. We conducted these reviews in accordance with generally accepted 

government auditing standards. We also reviewed audit reports and 

lessons learned reports issued by the Special Inspector General for Iraq 

Reconstruction and work completed by the Inspector General, 

Department of Defense. We conducted this work in accordance with 

generally accepted government auditing standards in September 2006. 

For questions regarding this testimony, please call Katherine V. Schinasi at

(202) 512-4841 or on schinasik@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the back page 

of this statement. Key contributors to this statement were Daniel Chen, 

Lily Chin, Tim DiNapoli, Kate France, Dave Groves, John Hutton, 

Chris Kunitz, Steve Lord, Micah McMillan, Kate Monahan, Mary Moutsos, 

Ken Patton, Jose Ramos, and Bill Woods. 

Scope and 

Methodology 

GAO Contacts and 

Staff 

Acknowledgments 

(120594) Page 14 GAO-06-1130T 
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