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A NEW ASSESSMENT OF IRAQ

HEARING

BEFORE THE

SUBCOMMITTEE ON NATIONAL SECURITY,

EMERGING THREATS, AND INTERNATIONAL

RELATIONS

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

APRIL 25, 2006

Serial No. 109–200

Printed for the use of the Committee on Government Reform

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

TOM DAVIS, Virginia, Chairman

CHRISTOPHER SHAYS, Connecticut

DAN BURTON, Indiana

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

GIL GUTKNECHT, Minnesota

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

JOHN J. DUNCAN, JR., Tennessee

CANDICE S. MILLER, Michigan

MICHAEL R. TURNER, Ohio

DARRELL E. ISSA, California

JON C. PORTER, Nevada

KENNY MARCHANT, Texas

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

CHARLES W. DENT, Pennsylvania

VIRGINIA FOXX, North Carolina

JEAN SCHMIDT, Ohio

——— ———

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

CHRIS VAN HOLLEN, Maryland

LINDA T. SANCHEZ, California

C.A. DUTCH RUPPERSBERGER, Maryland

BRIAN HIGGINS, New York

ELEANOR HOLMES NORTON, District of

Columbia

———

BERNARD SANDERS, Vermont

(Independent)

DAVID MARIN, Staff Director

LAWRENCE HALLORAN, Deputy Staff Director

TERESA AUSTIN, Chief Clerk

PHIL BARNETT, Minority Chief of Staff/Chief Counsel

SUBCOMMITTEE ON NATIONAL SECURITY, EMERGING THREATS, AND INTERNATIONAL

RELATIONS

CHRISTOPHER SHAYS, Connecticut, Chairman

KENNY MARCHANT, Texas

DAN BURTON, Indiana

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

STEVEN C. LATOURETTE, Ohio

TODD RUSSELL PLATTS, Pennsylvania

JOHN J. DUNCAN, JR., Tennessee

MICHAEL R. TURNER, Ohio

JON C. PORTER, Nevada

CHARLES W. DENT, Pennsylvania

DENNIS J. KUCINICH, Ohio

TOM LANTOS, California

BERNARD SANDERS, Vermont

CAROLYN B. MALONEY, New York

CHRIS VAN HOLLEN, Maryland

LINDA T. SANCHEZ, California

C.A. DUTCH RUPPERSBERGER, Maryland

STEPHEN F. LYNCH, Massachusetts

BRIAN HIGGINS, New York

EX OFFICIO

TOM DAVIS, Virginia HENRY A. WAXMAN, California

R. NICHOLAS PALARINO, PH.D., Staff Director

ROBERT A. BRIGGS, Clerk

ANDREW SU, Minority Professional Staff Member

(III)

C O N T E N T S

Page

Hearing held on April 25, 2006 .............................................................................. 1

Statement of:

Walker, David M., Comptroller General, U.S. Government Accountability

Office, accompanied by Joseph Christoff ..................................................... 31

Letters, statements, etc., submitted for the record by:

Shays, Hon. Christopher, a Representative in Congress from the State

of Connecticut, prepared statement of ........................................................ 3

Walker, David M., Comptroller General, U.S. Government Accountability

Office:

Information concerning Iraq contracting ................................................. 92

Prepared statement of ............................................................................... 34

Waxman, Hon. Henry A., a Representative in Congress from the State

of California:

Minority staff report ................................................................................. 7

New York Times article ............................................................................ 23

(1)

A NEW ASSESSMENT OF IRAQ

TUESDAY, APRIL 25, 2006

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON NATIONAL SECURITY, EMERGING

THREATS, AND INTERNATIONAL RELATIONS,

COMMITTEE ON GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 10:02 a.m., in room

2154, Rayburn House Office Building, Hon. Christopher Shays

(chairman of the subcommittee) presiding.

Present: Representatives Shays, Waxman, Van Hollen, and

Ruppersberger.

Staff present: J. Vincent Chase, chief investigator; R. Nicholas

Palarino, Ph.D., staff director; Robert A. Briggs, analyst; Marc

LaRoche, intern; Phil Barnett, minority staff director/chief counsel;

Karen Lightfoot, minority communications director/senior policy advisor; Jeff Baran, minority counsel; David Rapallo, minority chief

investigative counsel; Andrew Su, minority professional staff member; Earley Green, minority chief clerk; and Jean Gosa, minority

assistant clerk.

Mr. SHAYS. The quorum being present, the Subcommittee on National Security, Emerging Threats, and International Relations

hearing entitled, ‘‘A New Assessment of Iraq,’’ is called to order.

The selection of a prime minister offers hope Iraq will continue

on the path toward a representative government, diminished violence and economic growth. But for the foreseeable future, Iraq will

require continued support. And because we overthrew the former

Iraqi regime, the majority of that support must come from the

American people.

As we look to the future, it is essential we ask ourselves the

right questions. We have been asking, when do we pull our troops

out of Iraq? This is the wrong question. We should be asking, what

can we do to help the Iraqis succeed? And we should be clear what

we mean by success.

To help answer the question of how to succeed, we require objective on-the-ground assessments. We cannot afford to be mislead by

rosy assessments painted by some, nor apocalyptic assessments by

others.

In this regard, I call attention to a bipartisan group formed at

the urging of Congressman Frank Wolf of Virginia, myself and others, the Iraqi Study Group. This group is charged with conducting

a fresh-eyes assessment of the current and prospective situation in

Iraq, and is cochaired by former Secretary of State James Baker

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and former Congressman Lee Hamilton. We look forward to this bipartisan group’s findings and recommendations.

Today we are here to receive testimony from David Walker,

Comptroller General of the Government Accountability Office. Mr.

Walker and his audit teams have recently returned from Iraq. The

GAO’s examination identifies mistakes, progress and, most importantly, future challenges we face. His testimony can help us better

understand how to empower Iraqis so they may have security, representative government and economic prosperity.

I recently returned from my twelfth trip to Iraq. While there, we

also visited three countries in the region, the United Arab Emirates, Jordan, and Israel. Their leaders provided us with one overriding message: We must not fail in Iraq, and the United States

should not withdraw from Iraq prematurely.

I am convinced premature withdrawal of our military will guarantee failure. I believe we must replace our withdrawal mindset

with a mindset that appreciates what our military, State Department and others have accomplished in Iraq and the sacrifices made

by the people of Iraq to grasp hold of democracy and live a better

life.

I agree with Comptroller David Walker and his team when they

say, ‘‘the war in Iraq will not be won by the military alone, that

Iraq’s future requires strong Iraqi leadership, sustained U.S. commitment and a reenergized international community.’’

I think we get the first point; are wrestling with the second, sustained U.S. commitment; and are not doing enough on the third,

to reengage the international community.

As always, we thank the GAO for its absolutely invaluable oversight and look forward to the Comptroller General’s testimony this

morning.

At this time, the Chair would recognize Mr. Waxman.

[The prepared statement of Hon. Christopher Shays follows:]

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Mr. WAXMAN. Thank you very much, Mr. Chairman, for calling

this important hearing.

In March 2005, the Bush administration took the United States

to war against Iraq. Today, more than 3 years later, Iraq is actually worse off in key reconstruction sectors than before we arrived,

and the Bush administration is nowhere near feeling the rosy

promises it made before the war.

In October, I released a report, the Bush Administration Record,

The Reconstruction of Iraq. This report compared the administration’s rhetoric with the reality on the ground, and it found that the

administration had failed to deliver on its promises in three of the

most important reconstruction efforts: oil, electricity and water.

I would like to make this report part of the record for today’s

hearings, Mr. Chairman.

[The information referred to follows:]

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Mr. SHAYS. Without objection, so ordered.

Mr. WAXMAN. The report found that, in the oil sector, the administration promised to restore Iraq to pre-war oil production levels.

This was important so Iraq could ‘‘finance its own reconstruction,’’

but today, Iraq’s oil production and export levels are still well

below the pre-war levels. We spent over $2 billion, and the situation is worse than before we started.

In the electricity sector, the administration promised to increase

Iraq’s peak electricity output to 6,000 megawatts. After spending

more than $4 billion, peak output in October was 4,600 megawatts.

Today, it has dropped to 4,100 megawatts, which is below pre-war

levels. In fact, embassy officials in Baghdad told our staffs we’ll

never meet demand.

In the water sector, the administration promised that 90 percent

of Iraqis would have access to clean, drinkable water, but despite

spending over $1 billion, we’re nowhere near this goal. Before the

war, 50 percent of Iraqis had access to drinkable water. By late

2005, only 32 percent did.

The special inspector general for Iraq reconstruction, Stuart

Bowen, confirmed these findings. In testimony before this subcommittee, he concluded that there is a great chasm between what

the administration has promised and what it has delivered. Mr.

Bowen called this the reconstruction gap. In January, Mr. Bowen’s

office issued its own report concluding that reconstruction efforts in

these three key sectors of the Iraqi economy are failing.

And these aren’t the only areas in which progress has been poor.

A Washington Post article just this month described how the Parsons Company will complete only 20 health centers out of a

planned 142. Despite spending $200 million over 2 years, this reconstruction project will suffer an 86 percent shortfall, which is

really just shocking.

This morning, in the New York Times, in their lead story on the

left-hand side, Rebuilding of Iraq Oil Pipeline As Disaster Waiting

to Happen, this front-page article described Halliburton’s atrocious

work and the Bush administration’s atrocious oversight on a key

project to build oil pipelines under the Tigris River at a crossing

called Al Fatah. The article describes how Halliburton was specifically and repeatedly warned by geologists and other experts that

its approach was flawed and wouldn’t work, but the company ignored these warnings, pushing forward with the project and wasting over $75 million.

The article, which I would also like to have included in the

record, is astounding. Halliburton received a $100,000 a day just

for waiting around and doing nothing. Halliburton cut a deal with

a subcontractor that required them to drill holes, not to actually

succeed, but to drill holes. In essence, the taxpayer was paying

Halliburton to drill holes to nowhere, but Halliburton still received

its percentage of profits on the deal.

We know that large government contractors like Halliburton

have repeatedly overcharged the taxpayers. Auditors and the Defense Contract Audit Agency have identified over $1.4 billion in unreasonable and unsupported charges by Halliburton in Iraq. $1.4

billion. Yet, the Defense Department keeps awarding Halliburton

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millions in reimbursements, profits and bonuses that the auditors

recommended against paying.

The problem is that the administration’s management of the reconstruction has been fundamentally incompetent. Billion dollar

contracts were awarded with little or no competition to favored contractors. Competition for discrete projects was suppressed by dividing the country into a handful of thiefdoms.

The administration shipped nearly $12 billion in cash to Iraq but

disbursed it with virtually no financial controls. U.S. Government

officials, contractors and subcontractors have been charged with

kickback and bribery schemes, and dozens of additional criminal

corruption cases are now being processed. Against this backdrop,

the Bush administration continues to ignore reality.

Vice President Cheney says that the insurgency is in its last

throes and that progress on Iraq reconstruction has been superb.

And in a major speech in December, President Bush claimed there

had been quiet, steady progress in Iraq. Either the President and

the Vice President are remarkably out of touch, or they are not leveling with the American people.

Today, as we mark more than 3 years since the invasion, GAO

will update the subcommittee on the status of these key areas, and

I look forward to the Comptroller General’s testimony.

Thank you very much, Mr. Chairman.

Mr. SHAYS. Thank you, Mr. Waxman.

Thank you, Mr. Van Hollen, for being here, and you have the

floor.

Mr. VAN HOLLEN. Thank you, Mr. Shays, for holding this hearing. I also want to thank Mr. Waxman for his leadership on a

whole series of these issues, including his unveiling of the

misexpenditures of funds of Halliburton and the other problems in

the reconstruction effort.

Mr. Walker, welcome to you. I’m looking forward to your testimony.

Let me just say, we know from the record that the Bush administration has bungled the operations in Iraq in many different ways.

They planned for the immediate invasion and toppling of Saddam

Hussein, but they did not plan for winning the piece. In fact, we

know now that, with respect to the warfighting effort, they ignored

the advice of many of the generals at the Pentagon with respect to

the number of troops. General Shinseki’s prediction was famously,

of course, proved right despite the fact that he was ignored, and

worse than that, sort of panned at the time by senior leaders at

the Pentagon with respect to what he said would be needed for

boots on the ground in order to make the reconstruction of Iraq

successful.

Because of many failures, the fact of the matter is, a lot of the

funds that we had hoped to spend on reconstruction had to be diverted simply to provide security for those people who have been

involved in the reconstruction effort.

We also know that while there were plans in place at the State

Department and elsewhere for the reconstruction effort, the fact of

the matter is those plans were essentially junked and ignored. The

whole reconstruction effort was turned over to the folks, Secretary

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Rumsfeld and others at the Pentagon, who were totally unprepared

for the reconstruction effort and for rebuilding in Iraq.

We famously heard before the war from Under Secretary

Wolfowitz at the time that the Iraqi oil production would quickly

be able to pay for the costs in Iraq. We know now that we have

not even come up yet to pre-war production levels, and that is not

beginning to cover the costs that we are incurring in Iraq and, of

course, doesn’t begin of course to pay for the lives lost.

So I think there are many, many serious questions that we are

facing in Iraq. We have heard rosy predictions continuously from

the administration with respect to Iraq, and sometimes you just

have to think that it’s Alice in Wonderland over there.

So I’m looking forward to your assessment, a hardnosed assessment; I hope a realistic assessment of what’s going on in Iraq.

And, Mr. Chairman, again, thank you for holding the hearing.

Mr. SHAYS. Thank the gentleman.

Before swearing you in, Mr. Walker, and receiving your testimony, I would like to ask unanimous consent that all members of

the subcommittee be permitted to place an opening statement in

the record and the record remain open for 3 days for that purpose,

and without objection, so ordered.

Ask further unanimous consent all witnesses be permitted to include their written statement in the record. Without objection, so

ordered.

Mr. Waxman, I know you wanted two requests. We put the first

in; what was the second?

Mr. WAXMAN. The second was today’s New York Times article

about Halliburton drilling holes.

Mr. SHAYS. We’ll put the New York Times in without objection,

so ordered. The other one was?

[The information referred to follows:]

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Mr. WAXMAN. The first one was our report on last October.

Mr. SHAYS. OK. This is the report of the minority staff of the full

committee.

Mr. WAXMAN. Correct.

Mr. SHAYS. Mr. Walker, it’s a pleasure to have you here. I would

like to swear you in, but I think, as I mentioned to you, anyone

else who may be asked to give some comment, I would like you to

stand up, not sit at the desk, but at least stand up and be sworn

in. Only two.

[Witnesses sworn.]

Mr. SHAYS. I’d note for the record the witnesses responded in the

affirmative.

I think it’s fairly clear you’re the only witness, the only panel.

I have no interest in you trying to finish in 5 minutes. I want you

to say whatever you need to say and then what we’re going to do

is we’re going to have the Members have 10 minutes. We’ll keep

time but keep coming back so we may have one, two, three, four,

whatever rounds, and maybe there will be some other Members

that will join us.

At this time, Mr. Walker, we’re going to keep the clock on and

keep turning it over every 5 minutes so you get a sense of how

long, but speak as long as you need to.

STATEMENT OF DAVID M. WALKER, COMPTROLLER GENERAL,

U.S. GOVERNMENT ACCOUNTABILITY OFFICE, ACCOMPANIED BY JOSEPH CHRISTOFF

Mr. WALKER. Thank you, Mr. Chairman, Mr. Waxman, Mr. Van

Hollen. I appreciate all of you being here today, and I also appreciate the opportunity to testify before this subcommittee on the

U.S. efforts to stabilize and rebuild Iraq. Since you have entered

my entire statement in the record, Mr. Chairman, I will summarize

so we have more time for questions and answers.

Between fiscal years 2001 and 2005 the U.S. direct financial com- mitment to securing and establishing Iraq grew to $278 billion. In

February 2006, the administration requested an additional $123

billion to support U.S. stabilization and reconstruction operations

in Iraq and Afghanistan in fiscal years 2006 and 2007. These

amounts do not include future direct costs nor do they include the

significant additional recapitalization and other longer-term costs

that will be incurred due to the conflict in Iraq.

In November 2005, the President issued the National Strategy

for Victory in Iraq. That strategy states that progress along the political, security or economic track serves to reinforce the other

tracks. My testimony today is based on the four reports that we’ve

issued to the Congress since July 2005 and on our team’s recent

trips to Iraq, including my own most recent visit to Iraq earlier this

year.

In summary, the war in Iraq will not be won by the military

alone. Real success requires an integrated Iraqi, United States and

international effort to meet the political, security, economic and

other needs of the Iraqi people. In this regard, calendar 2006 will

be a critically important year, and more needs to be done by both

the United States and the international community to help ensure

that it results in real and sustainable progress within Iraq.

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The United States, our partners in Iraq have made some

progress in stabilizing and rebuilding Iraq. Iraqis have voted in increasing numbers, with over 12 million casting votes in the December 2005 election.

The number of security forces that the Coalition has trained and

equipped has increased from about 142,000 in March 2005 to about

242,000 in March 2006. In addition, the Iraqi forces are increasingly assuming greater responsibility for their Nation’s security.

Finally, the United States has completed or has underway about

500 water, oil and electricity reconstruction projects. However, this

progress is tempered by the overwhelming challenges faced in

forming a permanent government, quelling the insurgency and sectarian violence, providing basic services, and financing future reconstruction efforts.

As previously noted, the Iraqis have held three national elections, each with higher voter turnout percentages than the previous

election. This is a real accomplishment. However, 4 months after

the December 2005 election, Iraq is still forming a permanent government. Recent events provide some hope that the new government will be formed in the near future.

Once formed, the new government will confront the enormous

task of strengthening a range of government institutions, disbanding the militias, resolving disputes over national borders and oil

revenues, and addressing significant corruption. Appointments to

the key ministries of interior, defense and oil in particular will be

critical to unifying Iraq and minimizing sectarian violence.

As the new government develops, the Iraqis will need assistance

in training to help strengthen their national and provincial governments. They need more capacity-building assistance of a civilian

nature, and it needs to come not just from the United States but

also from others in the international community.

From 2004 to 2005, attacks against the Coalition, Iraqis and infrastructure increased 23 percent. Despite Coalition efforts, the insurgents continue to demonstrate to recruit, supply and attack Coalition and Iraqi security forces.

In addition, the sectarian tensions and violence increased following the February 2006 bombing of the Shi’a shrine in Samarra.

Since then, Iraqis have become increasingly concerned that civil

war could break out.

U.S. reconstruction efforts have focused on restoring Iraq’s basic

services, including refurbishing oil facilities, increasing electrical

generating capacity and rebuilding water treatment plants. As of

March 2006, oil and electricity production were below pre-war levels, and reconstruction goals for oil, electricity and water had not

been met.

Higher than expected security costs, funding reallocations, inadequate maintenance and other challenges have slowed the pace of

reconstruction efforts and limited the impact of the services provided.

Iraq will likely need more than $56 billion, more than the additional $56 billion estimated, for reconstruction and stabilization efforts. Let me restate that. They will likely need more than the

originally estimated $56 billion in order to achieve the reconstrucVerDate 11-MAY-2000 15:14 Dec 04, 2006 Jkt 000000 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 D:\DOCS\30897.TXT HGOVREF1 PsN: HGOVREF1
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tion and stabilization objectives, but it is unclear how Iraq will finance its reconstruction needs.

U.S. commitments are largely obligated, and future commitments

focus on sustaining existing infrastructure, strengthening ministerial capacity, and training and equipping Iraqi security forces.

International donors have been reluctant to commit additional

funds until security improves and Iraq accounts for the donors’ previous contributions.

Iraq can only contribute to its future reconstruction needs if it

increases its oil revenues, reduces energy and food subsidies, controls government operating expenses and takes steps to effectively

combat corruption.

Iraq is at a precarious stage in its emerging democracy. 2006 will

be a critically important year in its development. In moving forward to achieve U.S. goals, it is important that the United States

continue training and equipping Iraqi security forces and, more importantly, ensuring that these forces have the logistical capabilities

to support and sustain themselves. This is a key gap and a critical

need.

The United States, along with the international community,

should also help Iraqis develop the budgeting and administrative

tools they need to run their national and provincial governments.

Additionally, transparency and accountability mechanisms are essential, given the legacy of corruption inherited from the previous

regime.

Efforts should also be taken to assure the Iraqis are capable of

maintaining power plants, water treatment facilities and other

U.S.-funded infrastructure improvements. Although the United

States has played a key role in addressing these challenges, it is

important for the Iraqis to assume greater leadership and for the

international community to increase its efforts.

Collectively, Iraq’s future requires strong Iraqi leadership, sustained U.S. commitment, and a reengaged international community

that can provide support for a range of civilian needs for a significant period of time. More needs to be done to help the Iraqis help

themselves build capable government institutions that can deliver

real results that benefit all the Iraqi people. All of these steps will

be essential in order for real success to be achieved in a reasonably

timely and sustainable manner.

Thank you, Mr. Chairman.

[The prepared statement of Mr. Walker follows:]

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Mr. SHAYS. Thank you, Mr. Walker. We appreciate your testimony.

There are three Members here. I think I’ll start with Mr. Waxman then I’ll jump in, and then we’ll go to Mr. Van Hollen, and

then we’ll just come back.

Mr. Waxman, you have 10 minutes.

Mr. WAXMAN. Thank you, Mr. Chairman.

Mr. Walker, I’m pleased that you’re here. Six months ago, we

had a hearing in this subcommittee where we heard from a panel

of inspectors generals and auditors and their unanimous opinion

was that the Bush administration had not fulfilled its reconstruction promises in three critical areas; in the oil, electricity and

water areas. Some sectors were actually in worse shape than before

the war. So I appreciate your testimony because it gives us an opportunity to assess the current status of these key sectors.

Based on your testimony, it seems clear that the reconstruction

efforts are continuing to fail. In the oil sector, the administration

committed to restoring Iraq’s oil production and exports to pre-war

levels, and to do that, it has already spent over $2 billion to meet

the objective.

Mr. Walker, has the administration met this objective?

Mr. WALKER. No. The objectives have not been met with regard

to the oil, electricity and water sectors.

Mr. WAXMAN. Are we still below pre-war levels?

Mr. WALKER. We’re still below pre-war levels with regard to oil

and electricity. It’s unclear what the water level was pre-war.

That’s information we don’t have.

Mr. WAXMAN. Well, is the oil part higher or lower than before we

arrived?

Mr. WALKER. It’s lower.

Mr. WAXMAN. In the electricity sector, the administration said it

would increase peak electricity output to at least 6,000 megawatts,

and it spent $4 billion in an attempt to meet this objective. Has

the administration reached this objective?

Mr. WALKER. No, it has yet to reach that objective.

Mr. WAXMAN. Are we close?

Mr. WALKER. We’ve got a ways to go. We are slightly below prewar levels but quite a bit below what the goal is.

Mr. WAXMAN. My understanding is that the peak electricity output of 4,100 megawatts is lower than the pre-war levels of 4,400

megawatts, and of course, that’s far short of the 6,000 megawatts

promised.

Mr. WALKER. My data, Mr. Waxman, says peak level post-war

was about 5,400 megawatts, which was achieved in July 2005, but

now we’re down to about 4,100 megawatts. The pre-war was 4,300

megawatts, and the goal is 6,000 megawatts.

Mr. WAXMAN. Why is that? We evidently went up, but down

again.

Mr. WALKER. There continues to be a significant amount of instability in much of Iraq. There continues to be a problem with regard

to the effects of the insurgency, continues to be a problem with regard to the ability of the Iraqis to be able to maintain facilities that

we rebuild. So it’s a combination of a number of factors that have

caused us to be where we are.

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Mr. WAXMAN. What impact is this having on the Iraqi people?

Mr. WALKER. Obviously, the Iraqi people are like people anywhere in the world, they care about safe streets, having electricity,

clean water, having the trash picked up. And obviously, to the extent those areas are not at the levels that they need to be, it has

an adverse effect on their daily quality of life.

Mr. WAXMAN. How many hours a day do the average Iraqis have

electricity?

Mr. WALKER. It depends on the area. It varies. As you know, Mr.

Waxman, before the war, we had a situation where the regime was

trying to focus its efforts on providing essential services, including

electricity, to primarily the Sunni areas, and other areas were not

provided as much capability. I would ask Mr. Christoff to provide

some more details.

Mr. CHRISTOFF. The national average as of last week was 12.3

hours, but that varies. The Kurds have about 16 to 18 hours a day.

The Shi’as in the south are averaging around 10. Baghdad is at

about 5 to 8.

Mr. WAXMAN. It’s reverse rather. The Shi’a areas are getting

more electricity.

Mr. CHRISTOFF. And the Kurds.

Mr. WALKER. The stability, obviously, as you know, Mr. Waxman,

and we’ve got it in our testimony, varies by region of the country.

Some of the most challenging areas of the country are in the

Sunni-dominated areas.

Mr. WAXMAN. Are these temporary problems, or are production

levels consistently below pre-war levels?

Mr. WALKER. They have gone up and down. They have not consistently been below pre-war levels because pre-war levels were

4,300 megawatts. As I mentioned to you, in July 2005, we’d gotten

up almost to 5,400 megawatts at one time, but we’ve never reached

our goal. But keep in mind, our goal is significantly higher than

the pre-war level. The pre-war level was 4,300; our goal was 6,000.

Mr. WAXMAN. In the water sector, the administration said it

would make sure that 90 percent of Iraqis had access to drinkable

water, and to meet this objective, we spent over $1 billion. Have

we achieved this objective?

Mr. WALKER. We have not with regard to potable water. Even

though production has increased of late, we still have a problem because there are problems in transmission; there’s a significant

amount of loss of water between the water treatment facilities and

Iraqi homes.

Mr. WAXMAN. The administration officials keep telling us we’re

not hearing the good news stories from Iraq and that substantial

progress has been made in rebuilding the country. Six months ago,

the inspectors general and auditors told us there was a huge gap

between the administration’s rhetoric and reality. In fact, Stuart

Bowen, the special inspector general for Iraq reconstruction, called

this a reconstruction gap. Seems to me your testimony confirms

that the reconstruction is still failing in key sectors.

Mr. Walker, I’d like to take a closer look at the oil sector. I recently released a report that examined Halliburton’s second oil contract, called RIO 2, which was a followup to Halliburton’s original

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viously undisclosed correspondence, evaluations and audits. It revealed that government officials and investigators have harshly

criticized Halliburton’s performance under RIO 2.

Here are the exact words that the government officials and investigators used to describe Halliburton’s performance, ‘‘Profound systematic problems, exorbitant indirect costs, misleading, distorted

cost reports, a lack of cost control, an overwhelming negative evaluation and an obstructive corporate attitude toward oversight.’’

Halliburton’s cost reports were so bad that the Army took the extreme step of issuing a cure notice in January 2005. They notified

Halliburton that its RIO 2 contract could be terminated if the problems were not fixed.

Are you, Mr. Walker, aware of any other cure notices issued

under major Iraq contracts?

Mr. WALKER. I’m not. That was not our work, Mr. Waxman, but

I will check with my staff. And if we’re aware of anything else, I’ll

be happy to provide it for the record. As you know, there’s a special

inspector general that has been created for Iraq which has primary

responsibility for doing audit, investigation and evaluation work for

contracting activities in Iraq.

I hate to say it, but the simple fact is that the contracting area

has been on GAO’s high-risk list for the Defense Department for

many years, and Iraq is no exception. I wish our problems were

frankly confined just to Iraq, but we have serious contracting problems all throughout the Defense establishment.

Mr. WAXMAN. Let me ask you this, in conclusion. Halliburton’s

overall performance was so poor that it received no award fees for

first year of work. Are you aware of any other major contractor in

Iraq that received no award fee over—on over a quarter of a billion

dollars of work?

Mr. WALKER. I’m not, but I’ll check and provide it for the record.

I would note with regard to the article that you referred to at the

outset of the hearing that I had an opportunity to review, that they

did receive a 4 percent award fee, it’s my understanding, at least

that’s what was reported.

I think one of the problems we have in government, Mr. Waxman, is that if we’re paying incentive and award fees, we need to

pay for positive results achieved. The people do what they promise

or what we need and what they promise when they promised it and

at the cost that was agreed to. Unfortunately, that’s not the case

for all too many contracting arrangements in government. They

pay for effort, and that’s it, not results.

Mr. WAXMAN. On the House floor when we considered the supplemental appropriations bill for the future work in Iraq, Afghanistan and other areas, I offered an amendment that said if the government has been overcharged by any contractor by a sum of at

least a hundred million dollars, the government shouldn’t be giving

any other contracts to that contractor.

The argument that was advanced on the House floor was, well,

what if you still need the contractor, what if you still need that

contractor even though the contractor has taken advantage and

overcharged us as its client?

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Are we so dependent on Halliburton or any private contractor

that we couldn’t find anybody else to do work if they turn out to

be doing poor work and overcharging for that work?

Mr. WALKER. Several things. First, the practical problem is, how

do you define overcharged? That would be the practical problem.

Second, the Defense Department has relied upon KBR, which is a

subsidiary of Halliburton, to provide logistical support and a range

of other services for many years.

There are other options, but there aren’t many options, and

that’s one of the things we need to be looking at, is we need to be

making sure that we have viable options with regard to known and

recurring type needs such that if people aren’t delivering what they

promise or if the taxpayers aren’t getting the type of deal that they

deserve, that we have viable options that we can pursue.

So the need may still be there, the question is, how many people

can meet the need?

Mr. WAXMAN. I appreciate that answer. That’s really somewhat

distressing because, one, we ought to insist if we’re paying the

money, they do what they’re required to do. And if they’re not

going to do what they’re required to do, they should be sanctioned

and forced to give back the money, and then we ought to be seeking

out others who can do specific tasks instead.

Mr. WALKER. Mr. Waxman, if I might add, one of the challenges

that exists within the Defense Department is we need to improve

our contracting arrangements so we are very clear as to what we

are asking the contractor to do: We expect X result by Y time for

Z cost.

Now it’s not always possible to do that, but many times it is, and

we haven’t done that. All too frequently we’re paying for efforts

rather than results. That’s got to change.

Mr. WAXMAN. The Bush administration and others have argued

that security has been the big problem; that these contractors can’t

perform because we haven’t been able to get a secure environment

for reconstruction.

I would submit, and be interested in your comment, that we’ve

had some devastatingly poor choices made with respect to disbanding the Iraqi army. This RIO 2 contract shows that poor contractor

performance, aside from security, poor contractor performance is a

major factor, not an incidental one. Do you agree?

Mr. WALKER. It is a problem. With regard to security, I think it’s

important to keep two things in mind: As our statement notes, estimates of the direct cost associated with providing security associated with reconstruction efforts range from 16 percent to around 25

percent or so. But what that does not capture, which is very, very

important, that’s the direct cost of providing security.

You also have productivity losses. When you have an unstable security environment, then you can end up having a significant

amount of reduction in productivity and lost work effort because of

that. That number is not captured in there. So if you wanted to totally absorb the cost, I would argue, on a full absorption basis, it

would be much higher.

Mr. WAXMAN. Just looking at today’s New York Times article

where Halliburton had a project to build oil pipelines under the Tigris River, and then Halliburton was, even after they specifically

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and repeatedly have been warned by geologists and other experts

that their whole approach to this work was flawed and it wouldn’t

work, they went ahead anyway. And they spent over $75 million

before they finally had to admit I guess it wasn’t such a good idea

to ignore all the geological experts.

That had nothing to do with security; that was plain incompetence, and it didn’t hurt them at all because they still got paid.

Mr. WALKER. That’s an example, Mr. Waxman, of wholly inadequate transparency among other things with regard to what the

situation was. That was an instable area, there’s no question about

that. There were security challenges. But there were other problems that occurred that led to that. One of the problems was there

was not enough transparency over exactly where do they stand and

what progress was being made and what results were we getting

for the costs that was being incurred, and not only how much direct

security costs being incurred, but how much time was being lost in

other efforts associated with that.

Mr. WAXMAN. Well, the transparency, we should have been able

to see their terrible judgment, which ended up costing us at least

$75 million.

Thank you, Mr. Chairman.

Mr. SHAYS. You’re welcome.

Mr. Walker, thank you for being here. I want you to first tell me

how you’ve allocated your folks. You basically have done four studies to this subcommittee, but tell us about your four studies that

you have done, not in any great depth but basically what you have

done.

Mr. WALKER. We did work, Mr. Chairman, spanning all three

major dimensions. As you know, these are just four that we’ve

issued within the last several months. We have many other engagements ongoing.

Basically, we’ve tried to do work dealing with the security environment, the governance situation, also with regard to reconstruction efforts. The specific reports that are referred to I think are

outlined in my testimony. But we’re trying to follow those three

major dimensions because they are consistent with the plan that

the executive branch has developed for Iraq, and we think it makes

sense for us to try to follow that framework to the extent possible.

As you know, we do all this work under the Comptroller General’s authority but with your support and the support of other

Members and I want to compliment you again for the number of

hearings, oversight hearings you have had. There’s not enough

oversight going on in Congress, but this subcommittee is clearly an

exception to that general rule.

Mr. SHAYS. Thank you.

What I’d like to do is I’d like to isolate each part, the security,

the governance and the reconstruction. I’m going to say one of my

concerns is, when I hear your recommendations, which I agree

with, I want to be clear whether you think we fail if we don’t—for

instance, your primary point is we need to involve the international

community. And this is clearly a crucial year. If the international

community basically sticks their nose up at us and says, forget it,

are you saying we’re going to fail? Or are you saying it’s going to

be a lot more difficult and take a lot more time?

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Otherwise, if you are saying that if we don’t get international

help, we fail, you are basically putting it right in the hands of the

international community. I would like to think that’s not true. If

it is true, I need you to tell me.

Mr. WALKER. I believe it is critically important that the international community be much more engaged with regard to capacity

building for the new Iraqi government than it has been. As you

know, there were strong differences of opinion within the international community about whether and to what extent we and others should have gone into Iraq, but it is in our combined interest

for the entire international community for Iraq to succeed.

Can we be successful if the Iraqi community—pardon me, if the

international community does not engage? Yes, it’s not impossible

to be successful, but a lot more difficult, take a lot more time, a

lot more money.

We also have to keep in mind that the international community,

the U.N. as an institution, as well as other countries have significant expertise in trying to help other countries help themselves be

successful. It’s important that come forth at this point in time because, in some cases, they may be able to do things that we won’t

be able to do. We have limited resources; we have limited capacity.

And, candidly, one of the big concerns, Mr. Chairman, is, at certain

levels, we may have 15 to 20 more times people in uniform than

we have civilian players.

Mr. SHAYS. Let me kind of dissect part of this. This subcommittee has done a lot of investigations. One was, we initiated the Oilfor-Food program. When we began the Oil-for-Food program, we

learned that Saddam Hussein undersold the oil and got kickbacks

and directed it where he chose and overpaid for commodities and

got kickbacks and directed it for where he wanted.

The Dulfer report said two things: No weapons of mass destruction; the other thing the report said is, Saddam Hussein had

bought off the French and the Russians and was convinced they

would not support us in the Security Council and therefore did not

believe we would come. He didn’t believe we would attack him because he was convinced that his Oil-for-Food program had bought

off the French and the Russians.

So I’m wrestling with, if they were basically bought off, what

unbuys them?

Mr. WALKER. First, as you know, he is gone. We’re dealing with

a new situation. The one area where you can clearly say that tremendous progress has been made is politically. Tremendous

progress.

I’m testifying on Thursday before the Congress on the issue of

the U.N. and what the U.N. needs to do in order to be able to

strengthen its controls and also what the U.N. needs to do in order

to improve its oversight practices.

I believe, Mr. Chairman, that it is possible to be able to provide

additional transparency and accountability and to get better results. We need to learn from Oil-for-Food. We need to try to make

sure that appropriate steps are taken to minimize that happening

again.

Mr. SHAYS. I’m not sure you’re really responding to my question.

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dam bought off the French and the Russians. They did not support

going in. It’s not debatable, at least in terms of his own people who

said Saddam did not believe we would come. He was like Stalin

after we attacked; just as the Germans attacked, he didn’t believe

it and had to have it reconfirmed.

That’s one of the things I’m absolutely convinced about from my

hearings, is Saddam had bought off the French and Russians; the

U.N. would not support us. So what makes them support us now?

What information do you have that could make me feel that they

are going to support? That’s what I’d like to know.

Mr. WALKER. There are two aspects, Mr. Chairman. I understand

what you’re saying. First, whether or not the U.N. as an institution

and how it does business and what it takes for it as an institution

to provide broadbased support, whether it can and will step forward. It is providing some support.

Mr. SHAYS. They have stepped forward politically. I want to

make sure it’s part of the record. They have helped the election

process. And when I was there for their second election a week before, and I met with the U.N. Commission, they had helped organize the first vote, the second and third. Hugely successful.

I’m not right now talking about the U.N. structure, the commission. They said to me that the elections in October would be the

fairest anywhere in the world, that there would be greater support

of voters than we have in the United States. And we learned that

they voted, 63 percent of all adults, not registered voters; we

learned that when they voted, 79 percent supported the constitution, contrary to what people thought. And then in December, 76

percent of all adults. In the United States, if we get 65 percent of

the two-thirds who bother to register, we think that’s huge.

So you and I can probably agree that their election process—in

just 1 year establishing a government, created a constitution, ratified a constitution, elected a government—is unbelievably successful. Would you agree?

Mr. WALKER. It has been successful on the political front, yes.

Mr. SHAYS. So the issue now, at least in terms of the general

populace, so we can kind of put that aside and we can kind of say

that the U.N. was very helpful in that process. That’s an argument

I think that says the value of having the international communities. I’m not arguing with your point that if we can get the international community engaged so the political process was successful,

the U.N. was helpful, other countries helped in that process of the

election. It leaves the security and the reconstruction. Obviously,

the political process, as you point out, of 4-month delay is a big

issue. So they are learning.

Would you agree that the Sunnis and Kurds—let me ask it this

way and then I’ll tell you what I think. What did you learn from

the Sunnis and Kurds saying no to Jafri and ultimately the Shi’as

agreeing to select someone else? What did that tell you about the

political process?

Mr. WALKER. That’s a recent event and a subsequent event to the

work that we did and so we haven’t done work directly on that.

If I can, Mr. Chairman, if you’ll indulge me for a second, let me

be clear as to where I think we need additional help from the

75

United States and from the international community, now that it

looks——

Mr. SHAYS. I’m going to give you that chance because we’re going

to be here all day. What I’m trying to do is isolate where the issue

is, and you want to jump right there, but I want to make sure that

we have some understanding or disagreement, but some understanding of our disagreement on the three fronts, the economic, the

security, the political and the economic.

What can we learn—if you want me to answer the question, I

will, if you’re not inclined to, but what do you think—what was the

significance of ultimately, in your judgment, the minority holding

fast and forcing the majority to select someone else?

Mr. WALKER. It shows that one has to compromise in order to

achieve progress. It does show a willingness in the end, in my view,

for a desire to try to form a government of national unity that can

be acceptable broadly within Iraq. I think that is a plus. The real

key, Mr. Chairman——

Mr. SHAYS. Unless you want to still talk about the political. Don’t

leave the political yet.

Mr. WALKER. I will talk only about the political. The real key is

substantive success. As we know, we have a prime minister designate that was the result of the process that you just mentioned.

Now that has to be finalized and the government needs to be stood

up beyond the prime minister, including naming ministers to head

all the different government agencies, with particular importance

to defense——

Mr. SHAYS. Let me get to that because you’re talking about what

I think is a level underneath the democratic process of governance,

which I think is a key point.

What I learned from this was when I go to Iraq, I meet with

Iraqis, the Sunnis, Shia’s and Kurds. They lecture me. They say,

I’m an Iraqi. They say, I’m a Sunni, but I’m married to a Shi’a, or

the Kurds will say, I am a Kurd, but I’m a Sunni. I am an Iraqi.

From the press, I learned Sunnis, Shi’as and Kurds, but from the

Iraqis, I learned Iraqis. But those who never experienced democracy, they said majority rule, we get to run the place. And what

we learned when we became a country is majority rule, minority

rights.

For me, what is thrilling about what took place was that the minority, the Kurds and the Sunnis, both 20 percent, give or take,

link up, were able to veto the choice of the Shi’as. The Shi’as resisted for month after month, finally said, you know what, we accept minority right. You don’t get to choose who we choose, but you

get to veto.

To me, that’s just one more progress that’s noticeable and real.

Now you want to uncover the top part, which is the democracy, and

get into the governance. I think there are some huge points here,

and I think the point you’re telling me is to succeed with the governance, because I’m going to tell you what I think and you tell me

if I’m wrong, you have defense, interior, you have oil, go down the

line, agriculture and so on. We don’t have the capability to be with

every department, nor do we have frankly the respect of the Iraqis

to be the only ones.

76

So what I’m hearing you say is if you want that level to work,

the governance, we have to bring in folks who have had this experience in other parts of the world.

Mr. WALKER. Correct. We and the international community have

to do more to help the Iraqis help themselves build these institutions that can deliver results that all Iraqis care about. We talked

earlier in this hearing about what’s the status of the electricity,

what’s the status of the oil, what’s the status of the water. Ultimately Iraqis are like people anywhere, they care about having

safe streets, they want to have jobs, they want to have electricity,

they want to have clean water, they want to have their trashed

picked up, and we need to make sure that we’re helping to deliver

on that and it’s not just us, it’s the international community.

Mr. SHAYS. I just want to cover this territory. We obviously have

the concern about their learning about democracy, being able to

recognize majority rule, minority rights. The public has proved to

us—they put us to shame. In their country, they participate at risk

of death. I would also say at risk of death. You have Sunnis, Shi’as

and Kurds that are trying to form a government, and in some

areas, they’re targets. They’re not dead men walking, but their

lives are at risk every day. Very brave people.

But it gets into this issue of corruption. Obviously, knowing how

to do things, but corruption. I would like to say to you if anything

brings down Iraq, my biggest fear is corruption. It leads me to

make a parenthetical.

When Duke Cunningham, a Vietnam war hero and I believe a

very patriotic person slipped in, step by step, into corruption, into

payoffs, he not only was a corrupt person, he was a traitor. Because in the end, that’s what brings down a democracy.

How do we deal with the corruption in Iraq? And you put it up

there at high a level, as I would. Way up there.

Mr. WALKER. It is a very serious problem. When I went to Iraq

the latest time, the two primary reasons that I went there was, No.

1, to participate in a monthly meeting that is held between General

Casey, our Ambassador, and all the other top officials where

they’re trying to develop metrics and milestones to measure

progress across all these dimensions which we and others have recommended for some time; and, second, to meet with my counterpart who’s head of the Iraqi supreme audit institution.

I might note that I met his predecessor, who 3 weeks after meeting him was killed in a car bomb. When I met with my counterpart

in Iraq, we actually had to change locations because one of our

bomb sniffing dogs sniffed an explosive device close to where we

were supposed to meet. So you’re right, the people there are risking

their lives in many cases to do their job.

We, the GAO, the international organization of supreme audit institutions, and others are trying to work to help the Iraqi Supreme

Audit Board build its capacity to be able to do its job. I met last

week with the chief justice of the Commission on Public Integrity,

which as you know is a critical part of the Iraqi government to try

to be able to combat corruption, and we are trying to work with

him along with helping him network and my counterpart in Iraq

to network with their Arab counterparts and others in the international community to try to deliver results.

77

In the final analysis, there are several things that are going to

have to happen. There are significant revenues being lost as a result of corruption and as a result of the resale of oil and products—

oil products.

Part of the problem with that is the pricing structure for petroleum products in Iraq is much lower than it is in the surrounding

area, which creates a great incentive to arbitrage, to be able to obtain access to this and, you know, just go next door, one of several

countries next door in order to generate the revenues from that.

That has to be addressed, but that is going to be a difficult political

decision because you’re going to have to raise oil prices and gasoline prices in order to undercut that. Now look at how much controversy there is in this country right now with the increase in gasoline prices, but there you’re talking about going from, you know,

25 cents a gallon to 85 to $1.25.

Mr. SHAYS. Let me just close up with a question so I can move

to Mr. Van Hollen. Mr. Van Hollen, Mr. Waxman and I both ended

up with 15 minutes, so you will have that time.

So the bottom line is corruption is huge. And do you believe it’s

systemic throughout——

Mr. WALKER. It is a pervasive problem. It is particularly acute

in the oil sector because that’s over 90 percent of the government’s

revenues.

For example, when I was in this meeting, and some of the information is classified so I can’t get into this information, I looked at

the data that they put up on the chart, and within 15 seconds I

could tell that there was tremendous corruption going on. Because

you know what the price of oil is, you know what production is, and

you can see what’s going on with revenues, and they don’t track.

So this is a serious issue that has to be addressed, but it’s not confined just to that sector of the economy.

Mr. SHAYS. I’m just going to conclude by telling you what I think

I’m hearing you say. And what I think I’m hearing you saying is

that we absolutely need the help of the international community if

we are going to see real and noticeable progress; that, absent that,

it is going to stretch out at infinitum—and I’m going to put my parenthetical in—and then I question whether the American people

will have the staying power if they don’t start to see just continued

and real progress. And, obviously, if the Iraqis don’t see real

progress, then I think they also look to do things in a different

way.

I’m also going to say what I’m hearing you say—which I wasn’t

thinking about in the way you were, but I’m happy you brought it

out—is I’ve been looking at the government sector, the democratic—the governance sector more in terms of the elected officials,

and you’re opening my eyes to see, lift that cover up and look at

individual government agencies and the need to have some real

oversight there, and obviously our foreign friends could be helpful

in that.

Mr. WALKER. It’s not just oversight. It’s capacity building to help

the people responsible for managing those agencies and delivering

results to be effective in doing so but then having oversight to provide checks and balances to maximize the——

Mr. SHAYS. The training and the mentoring.

78

Mr. WALKER. Right.

Mr. SHAYS. Thank you, Mr. Van Hollen, for your patience.

Mr. VAN HOLLEN. Thank you, Mr. Chairman.

Mr. Walker, thank you again for your testimony.

You were very charitable when you said that there hadn’t been

enough oversight in the Congress here. With the exception of this

subcommittee pursuing some oversight within its limited jurisdiction, I think the House of Representatives has been totally AWOL

when it comes to oversight on this issue and has failed to live up

to its constitutional responsibilities. And I think, frankly—again,

with the exception of the subcommittee—it’s embarrassing as an

institution, as a separate branch of government.

We all remember back in May 2003, back on the aircraft carrier

Abraham Lincoln when the President unveiled the big placard saying ‘‘Mission Accomplished.’’ That was May 2003. I think we can

understand why the American people now have some skepticism

when the President talks about his strategy for victory and has a

big placard there.

If you go through the measurements that we’re talking about

today and you look at the strategy for victory and their list of accomplishments, it is missing progress in the areas we’re talking

about, in the oil sector, in terms of comparison to prewar levels,

electricity, other major measures of infrastructure improvement in

the country. As we’ve said, you know, a big part of the problem has

been the totally difficult security situation on the ground in Iraq.

In February of this year, when the report was issued, it stated

that the security situation in Iraq has deteriorated since June

2003, with significant increases in attacks against Iraqi and coalition forces. Since that report, of course, we did have the bombing

of the Mosque. Even after the new prime minister was named, we

had a series of bombings in Baghdad. That same day we found a

number of people, again, who had been shot through the head by

militias.

I take it that between February and today you continue to believe that the security—we have not turned the corner on the security situation; is that right?

Mr. WALKER. There are still challenges. The data with regard to

attacks from March is still classified. We were able to work with

the Defense Department to obtain declassification of the January

and February data but not March yet. I think if you look at page

11 of my testimony, figure two, you’ll see a summary of the stability status, including security for Iraq. I don’t think that’s changed

materially.

Mr. VAN HOLLEN. Did you have an opportunity to form an opinion during your visit there with respect to whether we’ve made any

progress in terms of reducing militia activity, reducing the infiltration of militias into police forces, and the extent to which the

armed forces—not the police forces, but the national armed forces—

are successful in being free of sectarian sort of divisions in their

ranks?

Mr. WALKER. We are doing additional work in that area.

I will tell you that, based upon the work that we’ve done so far,

much more progress has been made with the military in a number

of fronts, including that front, than with regard to the police forces.

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The military has come along further, and the infiltration is a bigger issue based upon data that we have so far with regard to the

police forces.

Mr. VAN HOLLEN. And no signs of improvement, to your knowledge, in that area.

Mr. WALKER. I couldn’t say there’s no signs of improvement. It’s

still a challenge.

Mr. VAN HOLLEN. All right. Let me ask a little bit about the sustainability issue because that’s been a continuing challenge. Even

when we’ve had some limited success in rebuilding infrastructure,

the capacity of the Iraqi agencies, civilian agencies to maintain

those improved infrastructures has been a very serious problem.

The chairman alluded to it a little bit at the end of the questioning,

the fact that, in addition to the political components, just the experts and everyday ability to maintain services is a challenge, to

say the least.

Can you give us any kind of confidence that we are improving

in that area? Because if you look at the measures, it doesn’t seem

to be. It seems, you know, we take one step forward in terms of

infrastructure, reconstruction, and then two steps back with respect to the failure to maintain it. What is going on in that——

Mr. WALKER. Well, I think we have a problem with regard to

planning and execution. Some of the examples have been provided

here at this hearing already. Another example is that if you look,

for example, at the health facilities, we have several hundred that

we’ve been working on, but we’re going to run out of money before

a vast majority of them are completed.

I think one of the things we need to be thinking about is we’ve

got a limited amount of resources. We need to make sure that we

target those resources to generate the best results as quickly as

possible. In some cases, that means building fewer in areas where

we think we can actually be successful and then, after we end up

achieving some successes, then focusing on other areas over time.

At the same point in time I will mention to you, as I said in my

testimony, there’s not going to be enough money. Additional money

is going to be necessary in order to rebuild all the areas that need

to be rebuilt, and the real question is where is it coming from and

to what extent are the Iraqis going to be able to do it. And they’re

not going to be able to do it all, it’s very clear, irrespective of what

the price of oil is today. And, furthermore, you know, whether and

to what extent we and others in the international community may

step up in that regard; the jury is out on that.

Mr. VAN HOLLEN. Well, let me ask you, you’re referring now to

the $56 billion number you referred to. Where exactly does that

number come from? Because there are lots of numbers, as I’m sure

you know, out there with respect to——

Mr. WALKER. I’ll ask Mr. Christoff to give you the details.

Mr. CHRISTOFF. The $56 billion was estimated in 2003 by a combination of the World Bank, the U.N. and CPA doing a quick initial

estimate of about—I think all of the sectors, including oil and electricity.

Mr. VAN HOLLEN. And your estimate now is that’s a low number,

is that right, based on your testimony? Do you have any idea what

the number is?

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Mr. CHRISTOFF. We haven’t concluded a number. But just the

events that transpired after that estimate, a great deal of looting,

higher security costs, plus estimates from both the Ministry of Oil

and Electricity, that those two ministries alone will need $50 billion makes the $56 billion figure——

Mr. VAN HOLLEN. Clearly, the assumptions that were in place at

the time of that $56 billion have not proven to be true. They were

obviously very optimistic assumptions.

Let me ask you, with respect to the costs of reconstruction and

the international commitments that have been made to date at donors’ conferences, do you have any overall numbers pledged? And,

second, do you have any numbers with respect to how many people

have followed through with their commitments, who has followed

through to date, who who has not followed through to date?

Mr. WALKER. We have some data on that. I’ll ask Mr. Christoff

to give the details.

But, as you know, Mr. Van Hollen, a lot of those pledges were

in the form of loans rather than grants; and we all know there is

a fundamental difference between a grant and a loan.

Mr. CHRISTOFF. $13.6 billion total that was pledged. I think we’re

up to about $3 billion that has actually come into the two trust

funds, the U.N. and the World Bank trust funds.

Mr. VAN HOLLEN. Is that $3 billion of those grants or loans, do

you know?

Mr. CHRISTOFF. That is grants, and the rest are predominantly

loans. When I met with the Japanese about a month ago, they were

on the verge of completing the loan agreement, about a $600 million loan agreement with the Iraqi government, so that would be

probably one of the biggest loans that would be coming through if

that could be brokered.

Mr. VAN HOLLEN. But other than the $3 billion, the remainder

of the pledges have not been made to——

Mr. CHRISTOFF. Well, there are loans that are available once the

government reaches agreement and once there is a government.

Mr. VAN HOLLEN. Let me followup a little bit on the corruption

issue, because especially in the oil industry it seems to be that the

lack of any kind of strong central government has allowed a lot of

the chiefs of the tribal areas and others to take advantage of the

situation.

You may have mentioned it, but I don’t know if you’re able to

quantify the amount of revenue lost to the central government as

a result of corruption. Obviously, it’s a difficult number to get a

hold of. I don’t know if you have any estimate of what’s been lost

to the central government.

Mr. WALKER. We don’t have a specific estimate, but it is very material.

Mr. VAN HOLLEN. All right.

As you may have seen, there was an estimate put together by

Joe Stankiewicz, a Nobel-Prize-winning economist, as to the total

cost of operations in Iraq—it wasn’t just reconstruction; it was the

total cost by the end of the day—in the range of $2 trillion. I don’t

know if you had an opportunity to look at the assumptions made

in there and make a judgment as to whether that’s in the ballpark.

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We all remember early on when Larry Lindsay, President Bush’s economic advisor, said that the cost might reach $200 billion—this

is before the war—and the administration said, oh, no way, it’s not

going to get anywhere in that ballpark. Well, we know that his estimate we should have looked at suspiciously, not because it was

too high but because it was too low. But I don’t know if you’ve had

any opportunity to make a judgment about the Stankiewicz quote.

Mr. WALKER. No, we haven’t had an opportunity to do that.

Let me just say that, obviously, you would have to make a lot

of assumptions, including a big one, which is how long are we going

to be there and in what size and who’s going to end up helping to

fund this capacity building and the reconstruction needs over a period of time. I touched in my testimony the fact that one has to be

careful not just to consider the direct cost but also there will be significant costs that will be incurred to recapitalize equipment, there

is significant costs that will be incurred for disability benefits and

a number of other benefits that will be paid for many years to

come.

Mr. VAN HOLLEN. Right. And, to date, GAO has not tried to undertake that kind of——

Mr. WALKER. We have not. I would imagine that CBO may try.

As you know, the agency in the legislative branch that’s responsible for trying to run budget numbers for the Congress is the

CBO, and we try not to compete with them.

Mr. VAN HOLLEN. Right. Let me ask you about Kirkuk—and I

don’t know—you have a little section in your report on Kirkuk. I

don’t know if you have any sense of the progress being made

among the parties with respect to resolving the control of Kirkuk

and control, of course, of the oil revenues that would be generated

from that oil-rich region.

Mr. WALKER. I would ask Mr. Christoff to address that.

Mr. CHRISTOFF. The constitution basically says it needs to be resolved by 2007. It hasn’t been resolved.

Mr. VAN HOLLEN. All right. And any negotiations, to your knowledge, that have gone on that would move us in the right direction?

Mr. CHRISTOFF. I’m not aware of any on Kirkuk.

Mr. VAN HOLLEN. All right.

Mr. WALKER. From a practical standpoint, without the national

unity government being in place, it’s probably not realistic to expect that there would be a tremendous amount of progress. Hopefully, there will be once it is fully in place.

Mr. VAN HOLLEN. Right. Well, they’ve tried off and on to negotiate the status of the oil revenues through the constitution and

others. But you’re right. I mean, I think that while I think it’s a

hopeful sign that they were able to get a prime minister named

and some cabinet officials, so far I think it would be—you would

be looking through rose-colored glasses to suggest that we’re over

the hill in any way, even on the political front here, given the

strong sectarian divisions in Iraq.

Ambassador Khalilzad said what lots of us said many years ago

with respect to Iraq, which is that we took the lid off Pandora’s

box; and the challenge in Iraq will always be to ensure that Iraqis

see themselves, as the chairman said, as Iraqis first, as opposed to

seeing themselves first as Sunnis, Shi’as, Kurds and other ethnic

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groups within Iraq. And while some of the political leadership may

have gotten there, I’m not sure the great majority of the country

has gotten there yet; and that, of course, is a big part of the ultimate challenge.

Thank you, Mr. Chairman.

Mr. SHAYS. I thank the gentleman very much.

I would concur with the gentleman that the political challenge in

Iraq is huge. And I like using your word governance, because it

gets down below the political and also looks at the everyday operation of the government. So I’m going to think more about governance as opposed to the political when I divide them into three

groups.

What I do think, though, is that Iraq has an easier opportunity

of becoming a viable country than the United States had. I look at

1776, I look at the Articles of Confederation, I look at the Constitution. We had to amend the Constitution 10 times just to get Virginia to be a part of it.

And I’m concerned with this, they haven’t done it yet in, what,

3 years. In 1 year, they had three elections; they established a constitution. So all I want to do is establish the point that their

progress has been huge, but it could blow up in their face. And we

will learn, how this new government is going to perform. It seems

to me on the political side of the equation, if they don’t get at corruption and don’t make some inroads, then they’re going to fail ultimately. That’s what I think. Corruption has to be dealt with.

What I would like to get into is the issue of security, and I’m

going to preface my question in this way. And I’m going to say, because I agree with my colleagues, that we totally underestimated

the challenge. I try to look as objectively as I can and as candidly

as I can. When we talked about the war originally, I honestly in

my own mind said we could fund it with their oil. The administration rebuked me and said it’s not going to be with their own oil because then it looks like we’re going after their oil. It’s going to be

our own dollars.

When I came back in August 2003 and said people on the ground

tell me they don’t have any money, and the administration came

in September with this request of $82 billion, I was floored by it.

I mean, I was floored.

What I believe is this: that they had plans, but their plans were

always wrong, and they were constantly always having to revise

their plan. They always underestimated the challenge.

When I was speaking with Bernie Kuric, the former police

chief—and it’s somewhat controversial, but he is an expert—he told

me when he was in Iraq in the early times and the people in Baghdad said we are going to disband the army, their police and their

border patrol, he told me he got right in their face and basically

said, let me understand something, you are going to get rid of their

police? Who is going to provide security? And his basic comment to

me was the folks who made that decision never got out of the

Green Zone in Baghdad. They never got out.

So my view is that when we disbanded their army, their police

and their border patrol, we left 24 million people defenseless in a

country the size of California; and then we said to 150,000 coalition

forces, you provide the police work, the border patrol and you be

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their army. And then, by the way, you train their police, their border patrol and their army. That’s what I think, and I think we took

a huge nose drive.

So when I talk about progress, I don’t look at April, 2003, Mr.

Walker, and say, OK, we’re here now, and it’s a trend line like this.

I look at it with a big drop, and the trend line going up—until the

bombing in the dome—significantly. We started to train their police, their border patrol and their army.

Now this is the area that I want to talk to you about. It’s my

belief—and I will tell you a Democratic colleague from Georgia has

enlightened me a little bit on this a little bit more. It’s my belief

that the Iraqi military is going to need us for a long time. They

don’t have the sergeants, the corporals. They didn’t develop middlelevel management. They don’t have the strategic logistic support,

as you pointed out. I’m emphasizing it. They’re not going to be able

to man helicopters in the next year or two. They don’t have helicopters, and they’re not going to have enough to man. So we’re

going to have to be for that.

They don’t have the medics. They don’t have a number of things

that they need. So I thought, well, that’s a bad thing.

Mr. McGovern said to me, I’m not sure in a country where the

military has overthrown the government a number of times you

want to have the military totally independent, totally without some

embedded forces that basically help guide and mentor and make

sure that these forces don’t become a way to overcome democracy.

Interesting point he made. He would make it better than I’ve made

it.

I guess my point to you here is, do you believe that there has

been significant progress with their police, their border patrol and

Army? If not, why not and where? If you think there’s been significant progress, do you think they have a long ways to go or what?

Mr. WALKER. I think there’s been progress. There’s been more

progress with regard to the military than there has with the police

forces. And I would respectfully suggest that if you want to really

get a sense as to how performance is going in this area or any area

you need to look at three dimensions: No. 1, how are things today;

No. 2, how are they trending; and, No. 3, how do they compare to

various other metrics?

In the case of Iraq, I would suggest at least two, prewar and

goal. You have to look at all three, how do they stand, how are they

trending and how do they compare to established metrics? Only by

looking at all three of those do you really get a full and fair view

I think of where things are.

But I would say that much more progress has been made with

regard to the military forces. Some progress has been made with

both.

Mr. SHAYS. But when you look at the stock market over 3 years

you can say you were here and then you’re here; what happened

in between? Would you agree that when we disbanded their army,

their police and their border patrol we left them basically defenseless and required an unbelievable effort on the part of a limited

number of troops, 150,000 troops—would you agree that taking

away their security left them somewhat defenseless for a period of

time?

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Mr. WALKER. Many believe that was a mistake and that it created a vacuum and that—and so I understand what you’re saying,

Mr. Chairman. You’re saying that from a practical standpoint that

might have been the truth, that might have been the floor. And if

you look at that rather than merely prewar, then we could be better off than otherwise, one might assert.

Mr. SHAYS. I would make that argument.

Mr. WALKER. I understand.

Mr. SHAYS. OK. It strikes me, when we talk about security, that

it’s logical to me that reconstruction is not going to succeed very

well if you can’t provide security to which people can do their job;

and so I put security and I put reconstruction in a closer link. And

I’m somewhat reluctant to talk about this because it’s been so successful we don’t draw attention to it, but the one area that we can

see no real destruction of any of the investments we’ve made—and

there have been thousands of them—are the non-government organizations.

I’m not going to name them, but one non-government organization and another that I’ve interacted with, they hired Iraqis to do

the work. When things got even dicier, they hired Iraqis to be the

non-government organization and hire out the work. So you had

westerners coming in with these non-government organizations,

and they hired Iraqis, and then when security got bad the westerners left, except for one or two, they hired Iraqis to contract with

Iraqis.

The testimony that we’ve had is not one school that they built,

not one bridge, not one water structure has been destroyed; and my

sense is that the model was Iraqis doing the work. I’d like you to

talk about reconstruction as it relates to—if you’ve done any

thought or work on this—having Iraqis do the work versus our

coming in with people from outside doing the work.

Mr. WALKER. I’ll ask Mr. Christoff to provide some details.

We have not, to my knowledge, done specific audit work in differentiating between those projects that were funded using that approach versus another. But if you can imagine, you get more ownership, you get more buy-in from the people because they were part

of the solution.

Mr. CHRISTOFF. You also spend less money.

And I think one thing we’re looking at right now is just how we

move from the design/build approach that we began with under

CPA to more direct contracting. And clearly one of the lessons

learned is that you can employ more Iraqis, you can engage more

Iraqis, and you eliminate the levels of overhead with the subcontractors and sub-subcontractors, and you can have a more direct

and immediate impact.

Mr. WALKER. We have similar problems in the Katrina situation,

quite frankly.

Mr. SHAYS. Interesting.

Well, I note that Mr. Ruppersberger is here.

I guess what I want to conclude this part of my questioning with

is, intuitively, it strikes me that if you don’t have good security

you’re not going to have successful reconstruction, particularly with

the big projects. So when I hear that we haven’t been as successful,

I say I’m not surprised. I don’t like it, but it seems to me when we

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made that fateful decision of disbanding their army, their police

and their border patrol—because I had Iraqis come to me and say,

why are you putting my brother, my uncle and my father out of

work? Why can’t we at least guard the hospitals? And I didn’t have

a good answer because I don’t know why we did it.

So my point to you is, when you tell me we haven’t succeeded

in these areas, would it have been possible for us to succeed without good security?

Mr. WALKER. I think security is much more than reconstruction.

Clearly, it is one of the major contributors to the fact that we

haven’t made as much progress we would have liked and expected

to at this point in time.

But as you know, Mr. Chairman, you and I both, when we were

in undergraduate school, remember studying Maslow’s hierarchy of

needs; and the most basic thing for any civilization is security, selfpreservation. And it’s not just an issue of being able to do reconstruction, it’s safe streets. So I think that because of some of the

decisions that were made in the past we created more problems for

ourselves and, in some cases, for the Iraqi people.

Mr. SHAYS. Thank you.

Mr. Ruppersberger, welcome. You have 15 minutes.

Mr. RUPPERSBERGER. Fifteen minutes, OK. I can do it quicker.

I just got back about 3 weeks ago from Iraq—more from an intelligence point of view on the Intelligence Committee—and one of the

things that we did was really look and see where we were. And one

of the things that I saw and what I would hope that we would look

at—and I want your opinion on this—right now, I think the military has come a long way, the Iraqi military. We’ve been training

them for, what, about 21⁄2 years now? How many years have we

been training the military?

Mr. WALKER. About 2 years. 2004. And I would agree, they’ve

come a lot further.

Mr. RUPPERSBERGER. We’ve met with military, we’ve met with

our people, General Casey. I would think at this point it’s time that

we start moving our troops from the urban areas and out to the

perimeter, and I think this would accomplish something very positive.

First thing, the Iraqi people need to understand that this is their

country and that their military—and, hopefully, police, even

though they’re not ready and we know that—that their military

would start patrolling the streets and start letting the Iraqi people

see that this is our country, this is our military. We still, by doing

that, we see over and over, every day it seems, or at least once a

week—which is very unfortunate—that our men and women, mostly National Guard, patrolling the urban areas in Iraq are getting

blown up by either suicide bomb or roadside bomb. If they’re not

being killed, they’re being maimed. There is no reason why the

Iraqi military can’t take control of that patrol.

We move our troops out to the perimeter; and then, by doing,

that we are standing ready to help them when they need us. But

they have to learn to do it on their own or they will be dependent

on us forever, and that’s not acceptable because eventually we have

to start moving out to that area.

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In our perimeter, we have some of the best special operations in

the world, probably the best in the world. And what we’re doing

now, it seems to me, is that we are really engaging the bad guys,

so to speak, on their level without really a lot of defense for our

men and women who are in the military. By being in the perimeter, we can use our technology, we can use our SIGIR and our intelligence to a better level than we could by patrolling the streets,

and we can also target those areas when, in fact, if the military is

having a difficult time, they call 911 and we’re there. A Blackhawk

helicopter can get you anywhere in the urban area of Iraq in 15,

20 minutes.

I think by doing this we would be able to, No. 1, start sending

a lot more of our troops home, but we have our key operations on

the perimeter. We’re backing up the Iraqis. We’re not leaving because they’re not ready yet, but they have to learn themselves to

provide their security.

What do you think of that theory.

Mr. WALKER. I think there are a number of reasons why it is to

our benefit for the Iraqis to take the lead as much as possible.

When we came into Iraq, we were viewed as liberators initially.

The longer we stay, the more that view is challenged.

I do think that the other thing that we need to do is we need

to focus on what are the needs of the Iraqi military. And even if

we train more and more units such that they can take the lead,

they don’t have certain equipment, they don’t have certain capabilities, they don’t have the type of intel, they don’t have the type of

communications, they don’t have the lift capacity, the transportation capacity. But it’s consistent with what you’re saying, because

I think one of the things we need to do is to focus on where it’s

going to be years before they have what they need and to target

our resources and target our efforts to focus on the need but to try

to get them to be out front as much as possible so that we’re providing essential support; we’re the reserve rather than being up

front.

Mr. RUPPERSBERGER. Well, there’s another issue there, too. It’s

the American people, and the American people understanding that,

what’s happening. And we see the poll numbers going down right

now. By moving to the perimeter, it’s an event. It says to the American people that we’re not just doing the same thing every day, that

there’s nothing really changing. This is a major event for us to pull

out of urban areas and to back up. And what you’re saying, we can

continue to supply the intelligence from the perimeter; we can give

them the resources. They have a lot of resources now from what

my briefing said. Yours may have been different. That’s No. 1.

The second thing that really disturbs me a lot, the only way

that—well, there are two issues. The first thing is that the Iraqi

government must be formed, and it looks like they’re getting to

that level. If we didn’t form an Iraqi government, if they didn’t

form their own government, it would seem to me we would have

civil war, and once there is civil war we have to get out of there.

I mean, we can’t stay there and deal with the issues.

But I see things there starting to change. I think one reason is

that the Sunnis understand now that they used to be in charge, but

they realize that if they’re not at the table, they will have severe

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problems with themselves, their children and their grandchildren.

And I think the Sunnis are starting to see that al Qaeda, who they

might have had a relationship with, especially with Zarqawi, is

starting to kill a lot of their own people, their own Sunnis; and I

think, as a result of that, that’s one of the reasons why they’re

coming to the table.

But I think one of the things that has to be done is that—not

only from our point of view but from their new government point

of view and from the Iraqi leadership, at this point you have to win

the hearts and minds of the people; and if those people feel that

their life was better under Saddam Hussein than it was under the

present conditions, then we’ve lost, and you’re not going to have

what we’re looking for in Iraq.

Now, in order to do that, we have to do a lot better in the area

of infrastructure and dealing with basic things, transportation,

education, potable water. I mean, these are things that need to be

done.

I was very disturbed—I had a briefing with the Army Corps of

Engineering while we were there about the lack—and this is something that I hope you can focus on—is that we have American contractors, some they’re doing the job, some are not. But we have

American contractors who have been given contracts, and they

have not been held accountable for performance, and I think it’s almost unpatriotic.

We’ve heard issues about Halliburton, and there is a lot there.

There is a construction company right now, a major construction

company, one of the largest in this country, who is contracted to

build health centers, which are very relevant and very important.

And money has been paid to this contractor, and yet they are not

performing. That’s inexcusable and it’s unacceptable, and I just

think that we have to learn from our past mistakes.

Any American company entering into a contract that has been

given this contract and they are not performing, we have to make

that an issue; and it is not being made an issue by the Department

of Defense the way it should be. They’re slipping, and they’re making excuses that, well, it’s a security issue.

Well, there are some contractors over there that are doing the

job, and there are some that are not. And I would like to talk to

you after this hearing about this one contracting company, which

is one of the largest in the country, that have walked away, basically, from the issue of health centers, and we can’t allow that to

happen. They should be fined, they should be sued, we should do

whatever we can to make them start—to help them to produce.

The amount of money that has been wasted, millions and maybe

billions of dollars has been unaccountable from the beginning with

the Office of Special Plans, we need to learn about that, and we

can’t have that structure anymore.

But now that we’re trying to fix the infrastructure and we’re still

having problems with our own American contractors, I think we

need to set up a system to deal with it. What is your opinion on

that?

Mr. WALKER. My view is that there’s been a tremendous amount

of waste and mismanagement with regard to contracting. My view

is that, with the Defense Department in particular, there have

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been serious, long-standing systemic problems in the contracting

area where, irrespective of the results that are achieved, that neither the executive branch nor the legislative branch has held the

appropriate people accountable. That means both the contractors

and the government officials who are responsible.

Mr. SHAYS. Would the gentleman suspend for just a second?

Mr. RUPPERSBERGER. Yes, I will yield.

Mr. SHAYS. I would say to you that you give us a list of some

contractors, some areas within DOD that need a look, and we will

have a hearing or a series of hearings on that. And the sooner you

provide it to us the sooner we will do it.

Mr. WALKER. I’ll give you a list.

Mr. SHAYS. Let me just tell you something. One of the things

that I think was the problem with choosing Halliburton was there

was this political effort to say, the Vice President—I want to just

get that out. I want you—whatever it is—if Halliburton is on the

list, whatever it is, I want you to give this subcommittee a list of

things that have just irritated you, you’re outraged by or whatever,

or suspect things, we will have a hearing. And I’ll pledge to this

committee that we’ll call them in, whatever it is; and let’s get the

politics out it, to the extent that we can, and go for it.

Mr. WALKER. I’ll do that.

I’ll give you one example where I’ve had one hearing on the Senate side but nothing on the House side yet, and that has to do with

incentive and award fees, the fact that we issued a report in July

of last year where the Defense Department paid out 91 percent on

average of available incentive and award fees irrespective of the results as to cost, quality and performance. There is a systemic, longstanding problem, and it’s not just Iraq.

Mr. RUPPERSBERGER. Does the gentleman yield back?

Mr. SHAYS. Yes.

Mr. RUPPERSBERGER. We agree. And you have to look at both

sides. To begin with, when we went into Iraq, there were probably

very few major corporations—and Halliburton is one. They’ve done

some good, and they’ve done some bad, but they haven’t been held

accountable. And when you put these major companies that want

to make money—I mean, that’s what they’re there for—that they

have—there are some companies that would not have been able to

supply all the linen and all the things that we need when we have

a force. You need soap, you need toilet paper, you need all these

issues just to have a force, wherever it is. But when they abuse

that system and when there is not—a lack of accountability, where

our fault, both in administration and Congress, we didn’t set the

standards. We didn’t set the standards, and then we didn’t have

anybody overseeing them and holding them accountable for the

standards, not only from a performance point of view but also from

a financial point of view. I mean, performance audits, financial audits, it wasn’t there. And we got into it, and we allowed the corporations to do it, and look what happened.

But where I’m concerned now—we have to learn from that in the

past. I’m concerned for right now and where we’re going, because

we want to get our troops out of there as soon as we can. We want

to try to stabilize that country.

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And what we are seeing now, what I’m seeing, is contractors,

large and major, that could do the job if they wanted to, and

they’re using as an excuse the security. We can provide the security in these certain areas and they can, too, and that should be

part of their contract to provide their security. But when they don’t

do the job, we should cancel every government contract they have

over here and leverage it. Why are we letting this system go forward where they’re abusing our equipment and taking our dollars?

And then, not only that, but I believe when you’re over there in

a war zone, when our men and women are there and you’re over

there as a contractor and you’re not producing, which slows down

our process, it’s unpatriotic.

And I applaud the chairman. I’m not mentioning any names now

because I don’t think it’s the right time, but I would love to have

this hearing. And I think it’s very, very important.

You know, you get so frustrated in having these hearings and

nothing gets accomplished. We need to start focusing on what is

going on, who’s abusing the process, making sure they’re being held

accountable for performance and the moneys they spend. And if

they’re not doing it we cut them off and we penalize them and we

aggressively pursue them.

Mr. WALKER. And I think it’s important to keep in mind that

some contractors are doing a very good job——

Mr. RUPPERSBERGER. Some are.

Mr. WALKER. Some aren’t. And some do pluses or minuses. I

mean, sometimes the same contractor will be successful in some

areas and not successful in others.

The last thing I will mention on this is it is a shared responsibility. In many cases, part of the problem is exactly what you touched

on: The government has not done a very good job of being specific

as to what we’re looking for. What are the requirements? What are

we looking for? In the absence of doing that, it’s tough to hold people accountable. We’ve had situations where, basically, we’ve let

the contractor define what they’re going to provide, or where we

keep on changing what the requirements are such that it’s almost

impossible for the contract to be successful.

I look forward to having the opportunity to focus on this issue,

not just with regard to Iraq but with regard to the systemic problem, because it’s serious.

Mr. SHAYS. Well, if a few years ago you couldn’t audit one trillion

transactions—I guess it was more than one trillion, wasn’t it? I’m

going back 4 or 5 years ago—you could not audit. There was no

audit trail.

Mr. WALKER. The Defense Department remains the single largest

obstacle to the U.S. Government being able to successfully withstand an audit.

Mr. SHAYS. Mr. Van Hollen.

Mr. VAN HOLLEN. Thank you, Mr. Chairman.

I think it’s very important that we do hold hearings in that area,

and I was pleased to see you want to explore that area. Because,

in response to your original questions from Mr. Waxman, I remember you said that. And I think most people would sort of say, well,

look, we know we’ve got problems in Iraq, we’ve heard about the

Halliburtons and the other problems in Iraq, but to say that it’s

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simply part of a larger problem with DOD contracting I think is

something that most people are not aware of. And I think it’s very

important that we get to the bottom of that, especially given the

huge amount of money we invest of our taxpayers’ money in the

area of defense.

And it does lead to a question I had with respect to the role of

the Inspector General at DOD. I know it’s maybe hard for one Inspector General to comment on the performance of the other, but

it does beg the question if there are all these serious problems with

respect to contracting at the Department of Defense, why is it that

the Inspector General at the Department of Defense has not uncovered more of these abuses? Have they? We just haven’t heard about

them?

We know that with respect to Iraq—and we had a hearing in this

subcommittee a while ago and we learned that because there was

a special Inspector General created for Iraq the Inspector General

for DOD decided not to put any people on the ground in Iraq, that

their reports were based on essentially secondhand information—

or not information direct, day-to-day on the ground. And many of

the members of this subcommittee were very surprised to learn

that they didn’t have a presence on the ground. We realize that

there is a special Inspector General, but for the DOD Inspector

General not to have people on the ground at least as of that time,

which was October of last year, was something I think shocked

many of us.

So if you could comment on whether that system is broken at the

Department of Defense, both with respect to Iraq and the oversight

there, and more generally.

Mr. WALKER. Well, first, you properly point out, Mr. Van Hollen,

that there is a special Inspector General in Iraq, SIGIR, which is

referred to for reconstruction. That’s not for everything. And that

comes to the point that you’re trying to make, is what is really important is that we recognize that there are a whole range of needs

for oversight and accountability, both for positive performance and

to assure appropriate accountability.

SIGIR is onsite. They have people both in Iraq as well as back

here. They have the most front-line presence with regard to the accountability community.

DOD and others have had people there from time to time. We

have had people there from time to time. We have committed that

we are going to open an office, a small office, in Baghdad. We are

in the process of taking steps to be able to do that, to be able to

have some continuing presence there, to be able to project people

in from time to time.

At the time that I was there last, which was the end of January,

early February, DOD, I do not believe, had a recurring presence

there. They would send people in from time to time.

I think you’re raising a legitimate point, that there needs to be

more done in order to assure who is covering what to make sure

that we are minimizing duplication but also minimizing gaps.

Mr. VAN HOLLEN. Right. Well, I mean, as you point out, the

SIGIR’s responsibility covers the reconstruction effort. The bulk of

the dollars—although we spent significant money on reconstrucVerDate 11-MAY-2000 15:14 Dec 04, 2006 Jkt 000000 PO 00000 Frm 00094 Fmt 6633 Sfmt 6633 D:\DOCS\30897.TXT HGOVREF1 PsN: HGOVREF1
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tion, we spent even more on nonreconstruction efforts in Iraq in

military operations and other procurement efforts going on there.

Frankly, I’m very pleased to hear you’re going to have a presence

on the ground. For us to discover that even to this day the Inspector General for the Department of Defense does not have people on

the ground in Iraq regularly is, I think, very disconcerting and

something, Mr. Chairman, I think we should address as a committee. And I would be happy to defer——

Mr. SHAYS. Thank you. I just want to say that this was a question raised when we had the Inspector Generals, and we received

notice from the Inspector Generals that in their judgment they had

made a mistake. They are setting up an operation in Kuwait,

which to me is fine as long as they then are in the theater. If

they’re in Kuwait, we have operations all in that area, in Qatar

and elsewhere.

But what is surprising to me is, when I thought about it, their

explanation was we have an Inspector General; we don’t need to be

there. But, as you point out, it is only for reconstruction. So it was

a mistake. They acknowledge it. They are there now because of

questions you and others raised.

Mr. WALKER. If I could clarify for the record, Mr. Chairman and

Mr. Van Hollen, we are dedicated to having a physical presence in

the region. Our presence is Baghdad. We are looking at other options. We haven’t dotted the I’s and crossed the T’s, but we’re committed to having a continuing presence. We would prefer the Green

Zone in Baghdad.

Mr. VAN HOLLEN. But just very briefly, since you made what I

think is a very important point and something the subcommittee

is going to be following up on with respect to contracting and procurement problems, abuses and wastes at the Department of Defense, is it that the Inspector General’s office there is not adequately—does not have adequate work force, does not have the resources? I mean, why, given the—why are they still on your

watchlist? Why are they the No. 1 worst performer in the U.S. Government, and why isn’t the IG’s office doing more about it?

Mr. WALKER. Because neither the executive branch nor the legislative branch has held DOD accountable for years.

Mr. VAN HOLLEN. Well, I would agree with you, as I said in my

earlier remarks, that there has not been adequate oversight from

Congress, No. 1. No. 2, I would hope—part of the purpose of having

these independent Inspector Generals in these agencies like DOD

is so that they have the freedom and the autonomy to uncover

some of this, and it’s disconcerting to learn that they have not. I’m

drawing my own conclusions based on your testimony, but clearly

they’ve not been doing an adequate job there.

Let me just ask one—there was some discussion a while ago

about the fact that we had contracted out some of the interrogation

efforts and things connected with torture—in fact, a Virginia company, CACI, was one of the ones that received that contract. Have

you looked into that issue any more? Are we still contracting out

interrogation services?

Mr. WALKER. I’ll followup with regard to that level of specificity

and provide it for the record.

[The information referred to follows:]

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Mr. WALKER. But I will tell you that was an example of an abuse

of an interagency contracting arrangement. It’s an area that is getting a lot more attention by us. It’s a situation where there was

a contract that was piggy-backed on to provide services that were

not clearly provided for under that contract, and it really kind of

puts a face on the overall issue.

Mr. VAN HOLLEN. They were just on some list, as I understand,

and therefore all of a sudden they were deemed eligible to receive

this much larger——

Mr. WALKER. Well, I think this is an important point. Congress

has passed a number of reforms in the contracting area which have

had positive consequences, but some problems have occurred. We

have been able to eliminate a lot of paperwork. We’ve been able to

get things done quicker. But in some situations we provided flexibilities where people have not always properly implemented those

flexibilities and there have been some abuses, and this is one example, and it is one of many that are on our high-risk list. The

DOD has 14 of 25 high-risk areas, either direct or indirect; and

many of them have been on for many, many years.

Mr. VAN HOLLEN. Well, thank you; and thank you, Mr. Chairman. I look forward to pursuing those issues.

Mr. SHAYS. I thank you, Mr. Van Hollen.

Let me just conclude by asking you, Mr. Walker, one, is there a

question or area we should have gone into that we didn’t that you

want to address? No. 2, I would appreciate just a very brief summary of your bottom line point in coming here today to make sure

that, in the course of our asking these questions, we’re not losing

your bottom line point.

Mr. WALKER. Well, the bottom line—I will repeat my final paragraph, which I think sums it up.

Collectively, Iraq’s future requires strong Iraqi leadership, sustained U.S. commitment, and a re-engaged international community. More needs to be done to help the Iraqis help themselves

build capable government institutions that can deliver real results

that benefit all of the Iraqi people. All of these steps will be essential in order to achieve real success in a reasonably timely and sustainable manner.

Mr. SHAYS. Thank you. I think that is very helpful testimony

today. We again applaud the work of you and your team. It is highly professional and well respected by Congress. Thank you very

much.

Mr. WALKER. Thank you.

Mr. SHAYS. This hearing is adjourned.

[Whereupon, at 11:52 a.m., the subcommittee was adjourned.]

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