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SIGIR 

Special Inspector General for IRAQ Reconstruction 

Special Inspector General for Iraq Reconstruction 

For more information, contact SIGIR Public Affairs at 

(703) 428-1100 or PublicAffairs@sigir.mil

Summary of Report: SIGIR 10-001 

Why SIGIR Did this Study 

The Special Inspector General for Iraq 

Reconstruction (SIGIR) has a legislative 

requirement to prepare a final forensic audit 

report on amounts made available for Iraq 

reconstruction. To help fulfill this requirement, 

SIGIR has undertaken audits examining major 

Iraq reconstruction contracts to determine 

contract costs, outcomes, and oversight, 

emphasizing issues related to vulnerabilities to 

fraud, waste, and abuse. 

This audit focused on the use of $1.12 billion 

for task orders issued from April 2004 to March 

2008 primarily for constructing Iraqi Security 

Forces facilities at numerous locations 

throughout Iraq. The task orders, issued under 

two contracts to the Environmental Chemical 

Corporation (ECC), were funded with $350.87 

million from the Iraq Relief and Reconstruction 

Fund and $768.82 million from the Iraq Security 

Forces Fund. They were managed and overseen 

by the Multi-National Security Transition 

Command-Iraq (MNSTC-I) and the Air Force 

Center for Engineering and the Environment 

(AFCEE). 

What SIGIR Recommends 

Previous SIGIR reports have included 

recommendations and/or lessons learned to 

address issues related to cost increases and 

schedule delays on Iraq reconstruction projects. 

The major issues identified in this report—the 

changes in work scopes after task order awards 

and the unstable security conditions—have been 

addressed. Accordingly, SIGIR includes no 

recommendations or lessons learned in this 

report. 

The procurement integrity issues identified but 

not pursued by MNSTC-I have been provided to 

SIGIR Investigations for consideration. 

Management Comments 

We provided a draft of this report to the 

responsible agencies for comment; however, 

SIGIR has no recommendations and the 

agencies are not required to comment. Neither 

MNSTC-I nor AFCEE provided comments. 

October 22, 2009 

IRAQI SECURITY FORCES FACILITIES: ENVIRONMENTAL 

CHEMICAL CORPORATION PROJECTS ACHIEVED RESULTS, BUT 

WITH SIGNIFICANT COST INCREASES AND SCHEDULE DELAYS 

What SIGIR Found 

SIGIR noted that numerous facilities were constructed under the ECC task 

orders, but SIGIR found cost increases, schedule delays, and some waste of 

funds. The major causes were work changes and security issues—inherent 

consequences of constructing facilities in a contingency environment. 

SIGIR further noted that management and oversight were generally sound, 

but identified a few concerns. 

Under 38 task orders, ECC constructed Iraqi Security Forces facilities such 

as headquarters buildings, barracks, dining halls, clinics, and police 

buildings. However, costs for these task orders increased from about $655 

million to about $1.12 billion (about 71%). The costs for three task orders 

increased more than 400%, a total increase of more than $150 million. Also, 

schedule delays were significant; the completion of 14 task orders was 

delayed by 18 months or more. 

By analyzing the costs and outcomes of the work, SIGIR identified the 

following key causes of cost and schedule changes:

• After award, task orders were significantly modified to change the scope 

of work and in some cases the locations of facilities. These changes 

increased costs and also resulted in wasted funds; SIGIR identified three 

examples totaling about $1.71 million. MNSTC-I and AFCEE officials 

told SIGIR that the wartime environment, the undeveloped Iraqi Army, 

and the fluid situation resulted in the award of task orders before plans 

were finalized and were then modified as needs changed. 

• The need for security resulted in paying more than $150 million (about 

14% of the total costs) to private security subcontractors. In addition, 

security issues increased contractors’ payrolls and subcontractors’ cost, 

and also delayed performance. The total effect of security conditions on 

costs and schedules could not be quantified. 

AFCEE and MNSTC-I shared management and oversight of the task orders 

and contracts. AFCEE used a competitive process to award 26 of the 38 task 

orders and provided justifications when competition was not used. Further, 

contract and project files provided extensive evidence of the management 

and oversight of ECC’s performance. However, a MNSTC-I investigation 

of procurement irregularity by one of its officials identified inappropriate 

relationships and other integrity issues, but the recommended follow-up was 

not conducted. Also, the Defense Contract Audit Agency has extensively 

audited ECC and identified about $5.71 million in questioned costs; 

nevertheless, some critical audits of ECC systems were not performed. 

SIGIR found that some fees—profits—paid to ECC appear to be excessive. 

ECC received $80.36 million in fees as profit, including $40.55 million for 

modification cost increases. Fees were to be increased only for added work, 

but AFCEE provided additional fees on cost increases when work was not 

added and on some cost increases resulting from contractor mismanagement. 

AFCEE officials believed that the fees were justified because changing work 

requirements and security issues caused cost increases. 
SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION

400 Army Navy Drive • Arlington, Virginia 22202 

October 22, 2009 

MEMORANDUM FOR COMMANDING GENERAL, MULTI-NATIONAL SECURITY 

TRANSITION COMMAND- IRAQ 

DIRECTOR, AIR FORCE CENTER FOR ENGINEERING AND THE 

ENVIRONMENT 

SUBJECT: Iraqi Security Forces Facilities: Environmental Chemical Corporation Projects 

Achieved Results, but with Significant Cost Increases and Schedule Delays 

(SIGIR 10-001) 

We are providing this audit report for your information and use. The report discusses our review 

of Iraq reconstruction projects under two contracts (FA8903-04-D-8672 and FA8903-06-D8511) awarded by the Air Force Center for Engineering and the Environment to the 

Environmental Chemical Corporation. We performed this audit in accordance with our statutory 

responsibilities contained in Public Law 108-106, as amended, which also incorporates the duties 

and responsibilities of inspectors general under the Inspector General Act of 1978. This law 

provides for independent and objective audits of programs and operations funded with amounts 

appropriated or otherwise made available for the reconstruction of Iraq, and for 

recommendations on related policies designed to promote economy, efficiency and effectiveness 

and to prevent and detect waste, fraud, and abuse. This audit was conducted as SIGIR Project 

9002. 

This report does not contain recommendations; accordingly, the responsible agencies were not 

required to provide comments on the draft report provided to them. The responsible agencies did 

not provide comments. 

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

please contact David Warren, Assistant Inspector General for Audits, (703) 604-0982/ 

david.warren@sigir.mil, or Glenn Furbish, Principal Deputy Assistant Inspector General for 

Audits, (703) 604-1388/ glenn.furbish@sigir.mil. 

Stuart W. Bowen, Jr. 

Inspector General 
cc: U.S. Secretary of State 

U.S. Ambassador to Iraq 

U.S. Secretary of Defense 

Commander, U.S. Central Command 

Commanding General, Multi National Force-Iraq 
Table of Contents 

Introduction 1

AFCEE’s Existing Contract Met Iraq Reconstruction Need 1

MNSTC-I Created to Develop Iraqi Security Forces 2

MNSTC-I and AFCEE Agreed on Services and Funding 3

Objectives 4

Facilities Constructed, but Cost Increases, Schedule Delays, and Waste 

Occurred 5

Estimated Costs Quadrupled on Some Task Orders 5

Lengthy Project Completion Delays 9

Significant Changes After Task Order Issued 12

Security Was a Major Factor in Cost Increases and Schedule Delays 15

Facilities for Iraqi Security Forces Were Constructed 18

Management and Oversight Were Generally Sound but a Few Concerns 

Identified 23

Most Awards Were Competitive, but Sole Source Awards and Modifications 

Involved Significant Construction 23

MNSTC-I and AFCEE Program Management and Oversight Generally Sound 27

DCAA Extensively Audited ECC, but Critical Audits Were Not Completed 32

Iraqi Subcontractors Offered Challenges and Benefits 37

Award Fees Appear Excessive 38

Conclusions and Recommendation 44

Conclusions 44

Recommendation 44

Management Comments 45

Appendix A—Scope and Methodology 46

Appendix B—Financial Status of ECC Task Orders for Reconstruction 

Projects as of July 31, 2009 50
Appendix C—Percentage of Task Order Obligations to Private Security 

Contractors 52

Appendix D—Acronyms 54

Appendix E—Audit Team Members 55

Appendix F—SIGIR Mission and Contact Information 56
1

Iraqi Security Forces Facilities: 

Environmental Chemical Corporation Projects 

Achieved Results, but with Significant Cost 

Increases and Schedule Delays 

SIGIR 10-001 October 22, 2009

Introduction

Public Law 108-106, as amended, requires that the Special Inspector General for Iraq 

Reconstruction (SIGIR) prepare a final forensic audit report “on all amounts appropriated or 

otherwise made available for the reconstruction of Iraq.” To help fulfill this requirement, SIGIR 

has undertaken a series of audits examining major Iraq reconstruction contracts. The objective 

of these audits is to examine contract cost, outcome, and management oversight, emphasizing 

issues related to vulnerabilities to fraud, waste, and abuse. 

This report provides the result of SIGIR’s audit of task orders totaling $1.12 billion primarily for 

Iraq reconstruction projects completed under two contracts awarded by the Air Force Center for 

Engineering and the Environment1

 (AFCEE) to the Environmental Chemical Corporation (ECC): 

the first in November 2003 (FA8903-04-D-8672) and the second (FA8903-06-D-8511) in April 

2006. Work under these contracts was funded through both the Iraq Relief and Reconstruction 

Fund and the Iraq Security Forces Fund. SIGIR identified ECC as one of the contractors 

receiving the most dollars under both funds. 

AFCEE’s Existing Contract Met Iraq Reconstruction Need 

In 1991, AFCEE was created as a Field Operating Agency of the Air Force Civil Engineer. 

AFCEE, which is headquartered in Texas, is to provide military housing construction as well as 

technical and professional services in environmental and installation planning and engineering. 

In November and December 2003, AFCEE competitively awarded 27 contracts. This was its 

fifth series of worldwide environmental/construction contracts that began in the early 1990s. Of 

the 40 contractors that submitted proposals for the contracts, 27 received awards, including 16 

small businesses. The awarded contracts were identical, with the exception of each contractor’s 

rate structure and its various partners and subcontractors. Under this competition, ECC was 

awarded contract FA8903-04-D-8672 in November 2003. 

AFCEE’s 2003 contracts led to its operations in Iraq. The Coalition Provisional Authority, 

which was responsible for overseeing, directing, and coordinating the relief and reconstruction 

effort in Iraq from May 2003 through June 2004, wanted to quickly renovate facilities for the 

New Iraqi Army. The Administrator of the Coalition Provisional Authority, believing that time 

 

1

 The Air Force Center for Engineering and the Environment was known as the Air Force Center for Environmental 

Excellence until June 2007. 
2

was insufficient to competitively award contracts and meet its urgent reconstruction 

requirements, requested the Joint Chief of Staff’s approval to authorize the use of AFCEE’s 

existing competitive contracts to begin this work. The Administrator’s request also stated that 

the U.S. Congress had approved a Supplemental Appropriation, which included $745 million to 

construct facilities for the New Iraqi Army. The Coalition Provisional Authority stated it 

critically needed a contracting vehicle to begin constructing facilities on or before January 15, 

2004, to maintain the program schedule. 

After the Administrator’s request was approved, AFCEE began a second level of competition, 

notifying its 27 contractors that the issuance of a competitive cost-plus-fixed-fee task order was 

planned. It provided the contractors with a statement of work and a rough order of magnitude 

estimated cost of the work and requested contractors’ proposals by a specified date. Any of the 

contractors could submit proposals. AFCEE officials awarded the task order after evaluating the 

proposals using technical and cost selection criteria. Using this approach, AFCEE awarded 20 

task orders for reconstruction work in Iraq to ECC under contract FA8903-04-D-8672. 

In April 2006, AFCEE awarded it sixth series of contracts to 20 contractors, including six small 

businesses. Each contract has a 5-year basic ordering period plus up to three 1-year options. For 

these contracts, AFCEE used the same two-level competition process that it used for the earlier 

contracts. Under this competition, ECC was awarded contract FA8903-06-D-8511 and was later 

awarded 18 task orders for Iraq reconstruction work. Under the initial AFCEE contract, ECC 

was identified as a small business. Under the second contract, it was no longer classified as a 

small business. 

Only a small portion of AFCEE’s personnel are involved in Iraq reconstruction, which is under 

AFCEE’s Capital Investment Execution Division, Contingency Operations Branch, which has 

offices in Iraq and Texas. In September 2007, near the peak of AFCEE’s and ECC’s efforts in 

Iraq, the Branch had 21 government employees and 20 on-site contractors provided by two 

Global Engineering, Integration, and Technical Assistance firms to provide program-level and 

project-level technical support to AFCEE and its customers. Although AFCEE has no 

contracting officers in Iraq, it assigned, on a rotating basis, two military and four civilian 

personnel to serve there primarily as project managers/contracting officer representatives. 

AFCEE’s site quality assurance personnel were provided by an indefinite delivery, indefinite 

quantity contractor. In September 2007, the quality assurance contractor was providing over 300 

quality assurance personnel, including expatriate, third-country, and Iraqi nationals, to support 

the Iraq program. 

MNSTC-I Created to Develop Iraqi Security Forces

The Coalition Provisional Authority’s authority over relief and reconstruction efforts in Iraq 

ended in June 2004 when the sovereign Iraqi Interim Government assumed power and the 

Coalition Provisional Authority was officially dissolved. According to United Nations 

Resolution 1546, at that time, the Multi-National Force-Iraq was to help build the capability of 

Iraqi Security Forces and institutions through a program of recruitment, training, equipping, 

mentoring, and monitoring. On June 28, 2004, the Multi-National Security Transition 

Command-Iraq (MNSTC-I) was established as a subordinate Multi-National Force-Iraq 

organization to execute this mission. MNSTC-I was to help the Government of Iraq develop, 
3

organize, train, equip, and sustain the Iraqi Security Forces and ministries. MNSTC-I stated that 

it accomplishes this mission by: 

• building and sustaining the institutional capability of the Iraqi Ministries of Defense and 

Interior 

• generating capable Iraqi Security Forces 

• developing professional Iraqi Security Forces 

• transitioning and transforming its mission into a traditional embassy office of security 

cooperation. 

According to MNSTC-I, the following three organizations were the key players in planning, 

managing, and funding the Iraq reconstruction projects undertaken by ECC: 

• J-5—Plans and Operations was responsible for developing the policy, plans, and 

programs in support of the Iraqi Armed Forces’ efforts to create self-reliant forces 

capable of maintaining security and stability. J-5 coordinated with Iraq’s Ministry of 

Defense, Joint Headquarters, and Ministry of Interior to build force development and 

doctrine, force generation, installation planning, and institutional training capabilities. It 

advised the Commander, MNSTC-I, on resource priorities to develop self-reliant Iraqi 

Security Forces. 

• J-7—Engineering was responsible for managing the construction of both new and 

renovation work for the Iraqi Security Forces. Responsibilities included project 

programming, schedule coordination, statements of work, funding coordination, 

construction status and issues, and final inspections. J-7 worked directly with AFCEE in 

planning and overseeing the specific projects carried out under ECC task orders. 

• J-8—Comptroller was responsible for managing resources to support the MNSTC-I 

mission and providing a full spectrum of financial management services and support for 

MNSTC-I, Coalition Forces, and Iraqi Security Forces. 

MNSTC-I and AFCEE Agreed on Services and Funding 

While AFCEE’s involvement in Iraq reconstruction projects began as a short-term means to meet 

urgent requirements, its work exceeded what was initially envisioned. A July 2004 SIGIR 

report2

 noted the lack of an agreement governing the extent and nature of AFCEE’s work in Iraq 

and recommended that one be developed. In June 2005, MNSTC-I and AFCEE signed a 

memorandum of agreement for AFCEE to provide, on a reimbursable basis, support services 

such as planning, design, upgrade, renovation, repair, and construction of facilities. The 

agreement specified the services to be provided and the basis for reimbursement of the services 

provided. The agreement was updated in May 2007. 

 

2 Task Orders Awarded by the Air Force Center for Environmental Excellence in Support of the Coalition 

Provisional Authority, SIGIR 04-004, 7/28/2004. 
4

In December 2003, the Coalition Provisional Authority provided $2 million to AFCEE to cover 

the initial costs for awarding and managing the reconstruction task orders. Later, an additional 

$500,000 was provided. AFCEE officials recognized the need to establish a fee to cover its 

incremental costs when it became apparent that AFCEE’s involvement in Iraq reconstruction 

would continue for a number of years. In June 2005, AFCEE and MNSTC-I signed an 

agreement providing for reimbursable orders at an adjustable percentage rate (the FY 2005 rate 

was 1.5%, herein referred to as “fee”) of the total program contracted for MNSTC-I. Quality 

assurance oversight became the largest single expense paid from the fee—about two-thirds of the 

1.5% fee. As the number of construction sites increased, AFCEE’s fee was increased to 2.5% to 

provide for additional quality assurance inspectors. Later, the May 2007 updated agreement 

eliminated the percentage fee and provided for full recovery of all AFCEE incremental costs. 

Objectives 

SIGIR’s reporting objectives are to (1) determine ECC’s contract cost and outcome and (2) 

review contract management oversight and controls, emphasizing vulnerabilities to fraud, waste, 

and abuse. We reviewed data on all 38 task orders AFCEE awarded to ECC for Iraq 

reconstruction and selected nine of the ECC task orders for a more detailed review, including the 

first and last ECC task orders and many of the high-dollar task orders. These task orders 

accounted for costs of about $420.49 million or about 40% of the obligations on the 38 task 

orders. 

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

Appendix A. For the financial status of ECC’s task orders as of July 31, 2009, see Appendix B. 

For the amount of funds paid to private security contractors for each task order, see Appendix C. 

For acronyms used, see Appendix D. For audit team members, see Appendix E. For the SIGIR 

mission and contact information, see Appendix F. 

 
5

Facilities Constructed, but Cost Increases, Schedule 

Delays, and Waste Occurred

ECC constructed numerous facilities for Iraqi Security Forces under the 38 AFCEE task orders. 

However, costs increased substantially from those specified in the initial task orders. For the 20 

task orders under the 2004 contract, costs increased from $373.16 million to $782.33 million, a 

110% increase. Under the second contract, the increases were more moderate, as costs increased 

from $282.78 million to $337.34 million, a 19% increase. In total, task order obligations 

increased from $655.94 million to $1,119.67 million. Also, projects took longer to complete 

than planned on all task orders, and work on 15 task orders increased 18 months or more. These 

increases in costs and periods of performance were most often due to modifications in the scope 

of work; these modifications significantly changed the work and, in some cases, the locations of 

facilities. While the total funds wasted by changes in work scope and locations after task order 

issuance cannot be easily quantified, we identified three specific examples of waste that totaled 

about $1.71 million. Security needs were another major factor in cost increases. ECC paid more 

than $150 million for the services of private security subcontractors; furthermore, security 

conditions also increased ECC and subcontractors costs and resulted in performance delays. 

Work changes and security issues that affected these task orders are inherent consequences of 

constructing facilities in a contingency environment. 

Estimated Costs Quadrupled on Some Task Orders 

In November 2003, AFCEE awarded ECC an indefinite delivery/indefinite quantity contract. 

This contract was not awarded for reconstruction projects in Iraq; however, under it, ECC was 

awarded 20 cost-plus-fixed-fee task orders totaling about $782.33 million3 to construct facilities 

for Iraqi Security Forces and undertake other reconstruction projects. In April 2006, AFCEE 

awarded ECC a follow-on indefinite delivery/indefinite quantity contract. Under this contract, 

ECC performed reconstruction work under 18 cost-plus-fixed-fee task orders totaling about 

$337.34 million. The first ECC task order for Iraq reconstruction was issued on April 15, 2004 

and the last one was issued on March 5, 2008. Appendix B provides a list of these task orders 

and the obligations and expenditures as of July 31, 2009. 

Initially, AFCEE obligated $350.87 million from the Iraq Relief and Reconstruction Fund for the 

first 13 ECC task orders. The Iraq Security Forces Fund was later used to finance the ECC task 

orders. It provided additional funding for 10 of the first 13 task orders that had been funded by 

the Iraq Relief and Reconstruction Fund and fully funded the remaining 25 task orders. 

Accordingly, the Iraq Security Forces Fund was used for 35 of the 38 ECC task orders, and 

$768.82 million had been obligated as of July 31, 2009. 

 

3

 The contract and task order amounts shown throughout this report reflect the obligations incurred rather than 

expenditures. Small additional expenditures will likely occur as the task orders and contracts are closed out. 

Obligations reflect the costs the government expects to incur on this contract. For consistency of presentation, data 

reliability, and data availability, we have used the obligation amounts shown in the Corps of Engineers Financial 

Management System as the costs under all contract task orders. Overall, the differences between obligations and 

expenditures are not material.
6

Tables 1 and 2 show the initial obligations on the 38 ECC task orders and obligations as of July 

31, 2009—the 9 task orders we selected for more detailed review are highlighted. For the 20 

task orders under the 2004 contract, costs increased from $373.14 million to $782.33 million, or 

110%, with costs on 3 task orders increasing over 400% or more than $150 million. For the 18 

task orders under the second contract, the increases were more moderate, with costs increasing 

from $282.78 million to $337.34 million, a 19% increase. In total, the task orders’ obligations 

increased from $655.92 million to $1,119.67 million, or about 71%. 

Table 1—Increased Obligations for Task Orders under 2004 Contract ($ millions) 

Contract FA8903-04-D-8672 

Task 

Order Reconstruction Project 

Initial 

Obligation

7/31/2009 

Obligation 

% Increase 

(Decrease)

03 Iraq Military Base at Kirkuk $47.50 $74.85 58%

06 Utilities at Kirkush Military Base 16.96 35.95 112%

08 An Numaniyah Military Base, Phase I, Part B 34.39 57.41 67%

11 Southern School Repair 29.19 29.18 0%

16 Brigade Facility at Kirkuk 38.24 43.67 14%

17 Al Kut Police Academy Facilities 7.52 26.12 247%

18 Camp India Facilities at Fallujah 48.62 84.70 74%

19 Repair/Replace Iraq Schools 3.10 6.90 123%

20 Harman Al Alil Military Base 5.47 35.44 545%

22 Renovate Base at Habbaniyah 15.57 63.48 308%

23 Border Forts 8 and 9 2.48 3.81 54%

24 Renovate Police Stations, Northern Region 2.88 2.96 3%

27 Iraq Training Brigade at Kirkush 9.30 8.95 (4%)

28 Renovate Facilities at Habbaniyah 7.30 55.15 655%

32 Mosul/Tikrit Facilities 18.41 98.13 433%

34 Northern Police Stations 13.93 13.93 0%

35 Facilities at Kirkush 25.88 47.69 84%

36 Facilities at Kirkuk 10.57 35.78 239%

37 Facilities at Camp Majid 35.33 57.73 63%

48 Facilities at Kirkuk 0.50 0.50 0%

20 Task Orders $373.14 $782.33 110%

Source: AFCEE contract files and U.S. Army Corps of Engineers Financial Management System data. 
7

Table 2—Increased Obligations for Task Orders under 2006 Contract ($ millions) 

Contract FA8903-06-D-8511 

Task 

Order Reconstruction Project 

Initial 

Obligation

7/31/2009 

Obligation 

% Increase 

(Decrease)

10 Facilities at Ramadi $27.51 $57.57 109%

12 Northwest Police Stations 19.55 26.47 35%

13 Facilities for 4th Division 21.19 39.31 86%

14 5th Division, Light Infantry Battalion 17.17 42.56 148%

15 Facilities for Iraq Forces, Camps Slayer and 

Victory at Baghdad 23.07 50.77 120%

19 Iraq Air Force Flight Operations at Kirkuk 4.49 5.75 28%

24 Commando Company at Al Asad 13.74 17.87 30%

25 Diyala Police Stations 9.82 10.36 5%

26 Facilities for Battalion Support, Gabe 15.00 14.86 (1%)

27 Iraq Army Base Camp at Jelewea 

(Terminated)

17.05 0.29 N/A

32 Baqubah-Diyala Police Stations 9.32 8.71 (7%)

33 Vehicle Maintenance Facility Babil 

(Terminated) 

9.84 - N/A

34 Extra Large GSU Samara (Terminated) 22.97 - N/A

35 Extra Large GSU Al Qaim (Terminated) 22.59 - N/A

38 Housing at Akashaat 10.39 13.88 34%

39 Housing at Qsar Amij 10.62 13.52 27%

40 Iraq Air Force Facilities at Kirkuk 4.96 4.96 0%

41 New Facilities and Modifications of Air Force 

Facilities at Kirkuk 23.50 30.46 30%

18 Task Orders $282.78 $337.34 19%

Source: AFCEE contract files and U.S. Army Corps of Engineers Financial Management System data. 
8

Table 3 summarizes the increase in obligation under the two contracts. 

Table 3—Increased Obligations for Task Orders under 2004 and 2006 

Contracts ($ millions) 

Contract 

Initial 

Obligation

7/31/2009 

Obligation % Increase 

FA8903-04-D-8672--20 Task Orders $373.14 $782.33 110% 

FA8903-06-D-8511--18 Task Orders 282.78 337.34 19% 

Total $655.92 $1,119.67 71% 

Note: If the four task orders under the 2006 contract that were terminated are removed from the calculation, the percentage 

increase in the obligations under that contract changes from 19% to 62% and the increase for the two contracts changes from 

71% to 92%. 

Source: Tables 1 and 2. 

As shown in Table 1, obligations on three task orders—numbers 20, 28, and 32 under the 2004 

contract—increased by more than 400%; task order 28 had the largest increase at 655%. The 

three task orders increased in costs from an initial $31.18 million to $188.72 million. 

Of the nine task orders that SIGIR selected for detailed review, task order 32 had the largest 

percentage increase—433%—as costs increased from $18.41M to $98.13M. The major reason 

for this increase was MNSTC-I’s decision to add additional forward operating bases and 

additional locations to the task order. One forward operating base, named Dagger, was deleted 

from the requirements because of a location change after work had begun and $316,500 had been 

expended. Thus, the funds were wasted. The addition of forward operating bases and locations 

resulted in an increase of about $50 million; about $19 million, or 20% of the task order’s costs, 

was used for base security, personal security details, and related air transportation. 

Increases were not as large on the other eight selected task orders, but significant changes did 

occur. Examples of increases under the 2004 contract follow: 

• Task order 3 increased from $47.50 million to $74.85 million, or 58%. Early changes 

on the task order resulted in additional costs for (1) site changes and increases in power 

requirements—about $8 million and (2) aviation facilities, ancillary utilities, and a new 

recruitment building—about $3 million. A later change added about $7 million to 

consolidate generators, construct a vehicle search area and a pass/identification building, 

and upgrade perimeter and front gate security. 

• Task order 16, for work during the second phase of task order 3, had a cost increase of 

14%, from $38.24 million to $43.67 million. However, shortly after award, the scope of 

work was significantly reduced from constructing facilities for a brigade (3,000 troops) to 

facilities for a battalion (750 troops). Numerous buildings estimated to cost about $7 

million were removed from the statement of work. However, MNSTC-I requests for 

changes to the original statement of work added $5.8 million to the total cost. Many of 

these cost increases resulted from work moved to this task order from task order 3. 
9

• Task order 36 increased from $10.57 million to $35.78 million, a cost increase of 239%, 

primarily as a result of adding a forward operating base and facilities for a support unit to 

the original task order. While the task order was awarded competitively to ECC, the 

additions by modifications to the task order were sole source. 

Lengthy Project Completion Delays 

None of the ECC task orders were completed within the period of performance established when 

the task orders were issued. Table 4 shows the changes in the completion dates for the period of 

performance on the task orders (four task orders that were terminated prior to work are 

excluded). As shown, task order 26 under the 2006 contract had the least delay in completion at 

4 months, but 14 of 34 task orders had completion delays of 18 months or more. In general, 

completion delays can be attributed to changing requirements, security issues, subcontractor 

performance issues, and government funding delays. 
10

Table 4—Changes in Task Order Completion Dates for 2004 Contract 

Contract FA8903-04-D-8672 

Task 

Order Reconstruction Project 

Completion Date 

Change 

Initial Final in months

03 Iraq Military Base at Kirkuk 1/15/2005 3/15/2006 14

06 Utilities at Kirkush Military Base 6/30/2004 7/31/2006 25

08 An Numaniyah Military Base, Phase I, Part B 1/15/2005 6/30/2006 17.5

11 Southern School Repair 8/12/2005 11/30/2005 3.5

16 Brigade Facility at Kirkuk 5/1/2005 7/15/2007 26.5

17 Al Kut Police Academy Facilities 5/1/2005 4/30/2007 24

18 Camp India Facilities at Fallujah 5/1/2005 3/31/2008 35

19 Repair/Replace Iraq Schools 5/15/2005 11/30/2005 6.5

20 Harman Al Alil Military Base 8/1/2005 4/30/2007 21

22 Renovate Base at Habbaniyah 8/1/2005 4/30/2007 21

23 Border Forts 8 and 9 12/31/2005 2/28/2006 2

24 Renovate Police Stations, Northern Region 3/31/2006 4/30/2006 1

27 Iraq Training Brigade at Kirkush 5/5/2006 9/30/2006 5

28 Renovate Facilities at Habbaniyah 4/30/2006 9/20/2008 28.5

32 Mosul/Tikrit Facilities 6/30/2006 9/11/2008 26.5

34 Northern Police Stations 8/31/2006 6/30/2007 10

35 Facilities at Kirkush 10/16/2006 4/29/2008 18.5

36 Facilities at Kirkuk 10/22/2006 11/30/2007 13

37 Facilities at Camp Majid 12/31/2006 11/30/2008 23

48 Facilities at Kirkuk 6/30/2008 6/30/2008 -

Source: AFCEE contract files. 
11

Table 5—Changes in Task Order Completion Dates for 2006 Contract 

Contract FA8903-06-D-8511 

Task 

Order Reconstruction Project 

Completion Date Change 

Initial Final in months

10 Facilities at Ramadi 4/11/2007 2/25/2009 22.5

12 Northwest Police Stations 3/31/2007 4/30/2008 13

13 Facilities for 4th Division 5/23/2007 11/12/2008 18

14 5th Division, Light Infantry Battalion 4/11/2007 10/8/2008 19

15 Facilities for Iraq Forces, Camps Slayer and 

Victory at Baghdad 5/31/2007 1/30/2009 20

19 Iraq Air Force Flight Operations at Kirkuk 11/20/2007 5/31/2008 6.5

24 Commando Company at Al Asad 4/28/2008 2/28/2009 10

25 Diyala Police Stations 4/30/2008 11/24/2008 7

26 Facilities for Battalion Support, Gabe 6/30/2008 10/23/2008 4

32 Baqubah-Diyala Police Stations 5/27/2008 11/19/2008 5.5

38 Housing at Akashaat 4/6/2008 11/15/2008 7.5

39 Housing at Qsar Amij 4/30/2008 11/15/2008 6.5

40 Iraq Air Force Facilities at Kirkuk 5/31/2008 3/05/2009 9

41 New Facilities and Modifications of Air Force 

Facilities at Kirkuk 8/31/2008 2/17/2009 5.5

Source: AFCEE contract files. 

Under the 2004 contract, task orders 3 and 16 for the construction of military facilities at Kirkuk 

were delayed by 14 and 26.5 months, respectively. An initial delay on task order 3 was noted 

about 2 months after it was issued. In two notices of potential changes issued in June 2004, ECC 

reported (1) working through changed conditions created by site changes, (2) a delay in approval 

of work plan, (3) security issues causing an increase in security personnel and fortifications, and 

(4) the removal of unexploded ordnance at the site, which was not mentioned in the statement of 

work. It requested a 57-day extension to the completion date—from July 15 to September 12—

but noted that the delay would not affect occupancy, which was not to occur until after the 

proposed completion date. Three subsequent modifications extended the period of performance; 

the final modification extended the period of performance from August 31, 2005, to March 15, 

2006. The final modification was approved about 6 months after the authorized period of 

performance had ended and only a few days before the new period of performance ended. 

Task order 16, issued in October 2004 for constructing facilities at Kirkuk, was an addition to 

facilities constructed under task order 3, and the completion date was May 1, 2005. 

Modifications 1 and 2 extended the period of performance; modification 2 extended it to 

September 30, 2005. Modification 5 in October 2005 through modification 12 in January 2007 

again extended the dates for task order completion. In summary, the period of performance 

(from March 15, 2004, to May 1, 2005) was extended about 26.5 months to July 2007. ECC 
12

officials commented that most of the building were completed and turned over much earlier than 

the completion date and that the extensions related partly to the disposition of generators not 

used at the site. 

Task order 32 under the 2004 contract for construction of facilities at Mosul/Tikrit had one of the 

longest delays—26.5 months; the completion date was extended from June 2006 to September 

2008. One of the major reasons for this delay was the change in project scope from constructing 

one facility, located in Tikrit, to constructing facilities at nine separate sites spread over Iraq’s 

northern region. 

On task order 13 under the 2006 contract for construction of 4th Division facilities, ECC cited a 

lack of funds as one reason for the major schedule delay of 18 months. It cited a number of other 

causes for the delay, including the following: 

• Coalition operational changes 

• Location changes 

• Scope changes 

• Design changes 

• Increased security requirements 

• Subcontractor performance 

• Limited availability of qualified subcontractors in the area 

ECC also cited a lack of funding as a major cause of delays; work was stopped on March 28, 

2008, with a notification to AFCEE that the limitation of cost had been reached. On March 19, 

2008, the Assistant Secretary of the Air Force (Acquisition) issued a memorandum noting that 

(1) contractors had been allowed to perform prior to the availability of funds for the effort and 

that this created potential violations of the Anti-Deficiency Act and (2) government officials 

should avoid any actions that could be construed as government “encouragement” for the 

contractor to perform prior to funding. ECC received interim funding and returned to work on 

April 7, 2008, but stopped work 2 weeks later pending additional funding. ECC stated that work 

did not resume until August 1, 2008. These funding delays accounted for about a third of the 18-

month delay. 

Significant Changes After Task Order Issued 

While ECC’s task orders had significant cost increases and/or schedule delays, these changes 

were most often due to changes in the work to be performed under the task orders rather than 

cost growth and schedule slippages. Task orders were issued with a specified scope of work, but 

after issuance, MNSTC-I and AFCEE significantly modified the scope of work and in some 

cases the locations of facilities. In most cases, these changes involved additional construction 

work and/or facilities. However, all changes in statements of work were not increases, and in 

some cases, the lack of significant cost increases and/or schedule delays on task orders is 

attributable to reductions in the work required after the task orders were issued. 

AFCEE’s procedures for processing changed work requirements note that necessary, reasonable, 

and justifiable changes are often encountered in Iraq reconstruction projects due to unforeseen 

site conditions, shifting mission requirements, and end-user requirements. An AFCEE 
13

contracting officer noted that when the early task orders were issued and changes were required, 

MNSTC-I and AFCEE did not have an acquisition strategy because they were operating in a 

wartime environment and responding to changing requirements driven by changes in Iraq, Iraq 

army planning, and fund availability. MNSTC-I officials agreed that many decisions were made 

“on the fly,” as task orders were awarded before plans were finalized and then modified 

according to emerging needs. They added that decisions were made to provide immediate 

capability to Iraqi forces because of the contingency environment (including combat operations). 

This combined with an undeveloped Iraqi Army and numerous emergent requirements resulted 

in fluid situations where much of the documentation of requirements and changes was by email. 

However, the officials noted that MNSTC-I and AFCEE’s requirements specify that changes are 

to be documented in work change requests and that as the security environment has stabilized, 

business practices have significantly improved. 

As previously noted, the first ECC task order—task order 3—for the Kirkuk base incurred cost 

increases and schedule delays because of construction site changes after the task order was 

issued. The original site was a planned industrial site, but the Coalition Provisional Authority 

approved a location change requested by the Kirkuk City Council and Governate. ECC noted 

that the project relocation costs were $6.70 million and that the relocation resulted in significant 

design changes in such areas as wastewater treatment, generators, and other utilities. About $1.1 

million were wasted funds expended for design and site work prior to relocation and for delays 

due to relocation. As the project continued, additional facilities and requirements were added. 

One such facility was the Sulaymaniyah Recruiting Center. An AFCEE analysis noted that using 

ECC to perform the recruiting center work was (1) the best value to the government by avoiding 

the expense of mobilizing another contractor into the harsh, high-risk, and dangerous 

environment near Kirkuk, with attendant coordination and learning curve issues and (2) a logical 

extension of the current scope. When the recruiting center was added, the plan was to renovate 

an existing building, but new construction of an entire facility was later required. As the task 

order neared completion, work was removed from the task order and added to the requirements 

for task order 16, which was for additional facilities at the Kirkuk military base. Without these 

reductions, the costs increase and schedule delays under task order 3 would have been greater. 

Task order 32 under the 2004 contract for construction of facilities at Mosul/Tikrit experienced 

both significant cost increases and schedule delays, and a number of major changes were made in 

the statement of work after it was issued. The solicitation for the task order identified the need 

for two Iraqi army facilities at one site for the 4th Division and five facilities at four sites for the 

2nd Division. Two of the four sites were to be awarded under modification 1 if funds became 

available after task order award in September 2005. However, in October 2005 shortly after the 

award, MNSTC-I revised the plan to implement a more decentralized approach. Instead of 

constructing facilities at a centralized base for the 4th Division and at four sites for the 2nd

Division, MNSTC-I decided to construct forward operating bases at several sites in northern 

Iraq, and ECC was directed to construct and/or renovate 15 facilities at 9 sites in northern Iraq. 

Modification 8 provided $13.75 million for increased costs—including management, 

mobilization, and site security—to build at nine separate sites spread out over the northern region 

instead of at one site in Tikrit. In total, the task order was modified 13 times, adding and 

deleting sites and facilities, extending the time of performance, removing individual buildings 

from projects, and providing and removing funds from projects. One change resulted from the 

Iraqi Army’s refusal to vacate buildings to be renovated at Al Kindi Military Base. 
14

Consequently, MNSTC-I removed the buildings from the task order, but ECC invoiced for about 

$225,000 for repairing building roofs. We also noted that ECC was paid $316,530 for site 

planning, layout, design, and mobilization for two forward operating bases that were removed 

from the task order. As a result of abandoning these efforts, the funds used for design, 

mobilization, and other efforts were wasted. 

Task order 13 under the 2006 contract also involved changed locations for forward operating 

bases and significant work changes. AFCEE awarded the task order to construct/restore/repair 

facilities for three light infantry battalions of the 1st Brigade, 4th Division, at three forward 

operating bases. After the award, one site was changed to a different location and a second site 

was removed from the project because occupying coalition forces could not vacate due to the 

markedly deteriorating security situation in central Iraq. According to ECC, the site change 

involved a move from a well-established operating base with a coalition presence, security, and 

life support services to a base that offered very little infrastructure for renovation, with little Iraqi 

Army and no Coalition Force presence. ECC also noted that delayed notice to proceed and 

confusion about site location affected costs and that the deteriorated security situation resulted in 

increased expenses for security, protective structures, and supervisory staff. Another factor that 

ECC cited as dramatically increasing security costs was the need to establish secure compounds 

to house contractor personnel outside of forward operating bases. 

Task order 15 under the 2006 contract also required changes because the planned construction 

sites at Camp Victory and Camp Slayer were occupied by coalition forces and unavailable for 

renovation until months later than planned. In addition, MNSTC-I decided that most of the 

buildings slated for Camp Victory would be constructed at Camp Slayer. According to contract 

files, the move of facilities and security issues added $13 million in costs, and additional security 

and construction delays added an additional $14.72 million to the task order. 

During our audit, we also identified a change in location for facilities and other significant scope 

changes on a task order not selected for detailed review, task order 37 under the 2004 contract. 

AFCEE did not issue a contract modification for the site change and scope changes until about a 

year after the location changed. Task order 37 was awarded in May 2006 for $35.33 million to 

construct facilities at Camp Majid; however, the site was changed from Ramadi to Al Asad in 

July 2006. In addition, an increase in the planned troop level resulted in the need for additional 

buildings and utilities. MNSTC-I officials stated that the move was made because the Iraqis 

reconfigured the location for the unit to be housed. While a series of emails confirm that 

MNSTC-I and AFCEE officials were aware of these changes and ECC was submitting work 

change requests, the first statement of work that we identified was dated February 2008. The 

initial five contract modifications, beginning in November 2006, did not address the site change 

or the scope change but were only no-cost extensions of the completion date. A modification 

that finally authorized ECC’s work was approved in July 2008 for $22.47 million, after the work 

was essentially complete. 

As shown in Table 2, four task orders were terminated, but costs were incurred on only one. 

Task order 27, under the 2006 contract, incurred costs of $290,000—wasted funds—before 

termination. The termination occurred because the Iraq Ministry of Health claimed the site and 

MNSTC-I and AFCEE placed the work on hold near the end of design work. When an 

alternative site was not identified, the task order was terminated. On a number of other task 
15

orders, the initial scope of work was reduced. As previously mentioned, a significant amount of 

work was removed from task order 16 under the 2004 contract. Nevertheless, the cost for task 

order 16 increased by 14%, and the completion date slipped 26.5 months. ECC officials noted 

that some months of slippages were related to disposition of the generators not used and 

acceptance issues with the Iraq government. They stated that occupancy occurred significantly 

earlier than the completion date. 

The total funds wasted by changes in work scopes and locations after the task orders were issued 

cannot be easily identified. Table 6 summarizes the three specific examples we identified where 

funds were wasted as a result of task order changes. 

Table 6—Wasted Funds from Task Order Changes 

Contract and Task Order Funds Wasted Reason for Wasted Funds 

FA8903-04-D-8672—Task Order 3 $1,100,000 Funds expended for design and site work 

prior to base relocation and for delays 

due to relocation 

FA8903-04-D-8672—Task Order 32 316,530 Removal of work site after funds 

expended 

FA8903-06-D-8511—Task Order 27 290,000 Funds expended prior to termination of 

task order 

Total $1,706,530

Source: AFCEE contract files. 

Security Was a Major Factor in Cost Increases and Schedule Delays 

Security and related issues were significant factors in cost growth and schedule delays. Site 

security, personal security details, and air transportation within and outside Iraq contributed to 

projects’ costs and accounted for about $155.11 million of the costs incurred on the 38 task 

orders—about 14% of total task order costs—according to ECC data. The percentage of costs 

for security services on individual task orders ranged from 3% to 34%. On seven task orders, 

20% or more of the costs were paid to private security contractors; the largest percentage was 

paid on task order 12 under the 2006 contract for construction of police stations in northwest 

Iraq. On this task order, 34% of the total cost, or $8.92 million of $26.47 million, was paid to the 

private security contractor. Appendix C shows the amounts and percentages of task order funds 

paid to private security contractors. In addition to the direct cost for security subcontractors, 

security concerns also caused construction costs increases and schedule delays. For example, on 

task orders 13 (facilities for 4th Brigade) and 14 (facilities for the 5th Division) under the 2006 

contract, security issues caused major cost increases and delays in construction work, and on task 

order 41 (Air Force facilities at Kirkuk), mortar attacks resulted in a direct construction cost 

increase of over $1.56 million. The total effect of security conditions on costs and schedules 

could not be quantified. 
16

Subcontractors Provided Security Services 

ECC was required to provide protection for its employees, subcontractors, other contractors, and 

U.S. government employees working on Iraq reconstruction projects. Protection from the 

actions of terrorists, anti-coalition forces, and criminals included providing site security, 

hardened base camps and other facilities, armored vehicles and protective gear, and security 

escorts to facilitate the movement of personnel and material to and from job sites in and out of 

Iraq. Additional expenditures for security were necessary when construction was delayed 

whether due to changing U.S. government requirements, inefficient subcontractors, or insurgent 

attacks. 

ECC data show that eight subcontractors provided security services but that most services were 

provided by SafeNet Security Services. SafeNet provided services costing about $112.06 

million, or 72% of the total security services cost. Also, prior to ECC contracting directly with 

SafeNet, SafeNet and Overseas Security and Strategy (a joint venture) provided security services 

costing an additional $19 million. While ECC obtained competitive proposals from private 

security contractors for some of its work, it did not obtain competitive proposals for six of the 

nine task orders that we reviewed and that SafeNet was awarded. ECC officials stated that 

SafeNet was awarded additional work at other sites and locations based on rates that SafeNet had 

previously bid on competitive proposals. AFCEE’s contract documents for task order 32 under 

the 2004 contract (Mosul/Tikrit facilities) show that ECC requested bids from six security 

companies. Three companies responded, and ECC, using best value as the selection criteria with 

heavy dependence on technical ability, selected SafeNet, which scored the highest on all nine 

technical elements and was in the middle on cost. ECC’s vouchers submitted for the task order 

show that SafeNet provided site security at one site from November 2005 to May 2007 and at 

another site from July 2006 to May 2007. Since ECC was to have completed construction at the 

sites before May 2007, the delay resulted in increased security costs at both sites. 

Between September 2006 and January 2008, ECC had a significant increase in the number of 

task orders and construction sites in Iraq. ECC stated that at its peak, work was ongoing at 21 

different sites and that project management staffs around the country employed 145 expatriates, 

175 third country nationals, and more than 300 Iraqi nationals. Security details were needed to 

provide support for operational and administrative movements (management site visits and 

employees’ rest and relaxation trips). In early 2007, ECC had seven fully staffed personal 

security details in Iraq to escort personnel around the country each day. A low profile detail, at a 

cost of $6,636 per day, operated with a minimum of 12 persons, and a high profile detail, at a 

cost of $13,299 per day, operated with 14 persons. In addition, SafeNet said that its high profile 

detail included four armored vehicles, including two gun vehicles, and two personnel carriers 

capable of transporting eight passengers. 

After a November 2006 attack on a personal security detail and the kidnapping of four team 

members, ECC conducted a study to determine how best to provide safe, efficient, and costeffective travel for its personnel in Iraq. After assessing charges by the only operating aircraft 

charter service in Iraq, ECC released a February 2007 request for proposal from security firms to 

provide both air and ground security with three objectives: (1) reduce as much as possible the 

exposure of personnel moving over the road; (2) achieve increased flexibility and facilitate more 

remote management by quickly moving project management people to sites; and (3) reduce 
17

costs, if possible, when moving personnel. ECC solicited nine firms for proposals; however, 

only SafeNet submitted a proposal. 

In February 2007, SafeNet began providing ECC with air transportation between Amman, Jordan 

(where ECC had established a program management office) and sites in Iraq. SafeNet provided 

two aircraft—a 6-seater at $246,713 per month and an 18-seater at $182,500 per month. Due to 

Iraq Federal Aviation Authority requirements, the aircraft could stay overnight in Iraq only at the 

Baghdad International Airport, necessitating trips to originate and end in either Amman or 

Baghdad. SafeNet provided fixed-wing aircraft flights for ECC personnel from the management 

office to project sites throughout Iraq, and the costs were allocated among the projects and task 

orders. ECC noted that when it began using aircraft for movement of personnel, the number of 

security details operating in Iraq was reduced from seven to five initially and later to three. 

Construction Costs and Schedule Delays Driven by Security 

In addition to the cost for private security contractors, many of the construction cost increases 

and schedule delays experienced by ECC and its subcontractor were driven by security issues. 

The following details from three task orders illustrate these security issues and their effects on 

costs and schedules.

In an August 2007 cost proposal for a $6.19 million modification to task order 13 under the 2006 

contract (facilities for 4th Brigade), ECC notes that significant changes in security conditions had 

increased costs. The proposal noted that degraded security conditions in the region necessitated 

a more expensive convoy strategy for transiting the region. Also, unexpected costs had been 

incurred to establish secure compounds and secure perimeters at the forward operating bases. 

Finally, the proposal notes that because of the high level of insurgent activity in the region, few 

Iraqi contractors or skilled laborers were willing to work at the forward operating bases and 

those that were willing were well aware of the challenges and priced their work high—

subcontractor bids came in higher than the original budget. The proposal identifies details about 

security incidents from November 2006 to March 2007 that impacted costs and schedules. In 

one example, ECC notes that the fourth attempt for one logistics convoy to transport food and 

other consumables to project sites was successful. However, each convoy was attacked and one 

attack led to the abduction of seven local nationals and four expatriates. 

Under task order 14 of the 2006 contract (facilities for 5th Division), ECC requested a field 

performance extension from February 14 to August 30, 2007, citing significant delays in 

mobilizing at the two construction sites because of frequent attacks on convoys, the nature of the 

remote location, and the lack of life support. About 3 months later in April 2007, ECC reported 

that costs had increased due to additional security issues, including an increase of indirect fire 

attacks, threats made to workers, and difficulty bringing in materials. Again in August 2007, 

ECC reported that increased site security requirements and additional costs for personal security 

details resulted in increased costs and that subcontractor pricing was higher than the budgeted 

dollar amount. Also, it reported numerous indirect fire attacks at the forward operating base, 

further delaying progress and reducing the number of local nationals willing to work. 

Under task order 41 of the 2006 contract (Air Force facilities at Kirkuk), ECC submitted a 

proposal in December 2008 for additional funding to compensate for schedule delays for work at 

Kirkuk Air Base. Two of the issues addressed in the proposal were ECC’s increases in 
18

operational cost because of two insurgent rocket attacks and restrictions imposed by the 

Coalition regarding the screening/badging of project personnel. ECC requested about $0.73 

million for these security requirements, and two subcontractors also submitted proposals for 

about $0.83 million in additional costs through ECC. Since AFCEE had accepted almost all of 

the ECC and subcontractor costs, the rocket attacks and screening/badging issues added about 

$1.56 million to costs. 

Facilities for Iraqi Security Forces Were Constructed 

Despite cost increases, schedule delays, task order changes, and security issues, ECC managed 

the construction of facilities for Iraqi Security Forces in many locations across Iraq. These 

facilities included barracks, headquarters buildings, dining halls, clinics, mosques, police 

buildings, jails, garages, maintenance shops and other structures such as fences, sunshades, 

fueling stations, and security entrances. Examples of work accomplished follow: 

Contract FA8903-04-D-8672-Task Order 3—Construct 1st Brigade Kirkuk Military Base 

Facilities 

This first task order issued to ECC for reconstruction work was to undertake the first phase of 

construction at Kirkuk Military Base. The task order included demolishing existing structures, 

removing debris, constructing roads, providing utilities, and constructing facilities for one 

brigade garrison, a brigade headquarters company, brigade support troops, and training facilities. 

ECC reported that completed construction included 116 facilities with over 66,000 cubic meters 

of space, 4 kilometers of roads, 10 kilometers of fence, 2,100 meters of waste/wastewater line, 

and 6,000 meters of power lines. The facilities include barracks, a headquarters building, dining 

halls, and other buildings such as garages, maintenance shops, a fire station, a clinic, a mosque, a 

police building, and a jail. The costs to complete work originally planned for task order 3 work 

was carried forward to task order 16. 

Contract FA8903-04-D-8672-Task Order 16—Construct 2nd Brigade Kirkuk Military Base 

Facilities 

This task order was for the second phase of construction at Kirkuk Military Base (a follow-on to 

task order 3 construction) and was for the construction of facilities that included 92 buildings and 

related electrical, sewer, and water infrastructure. The plan was that the new brigade would be a 

mirror image of construction to be done under task order 3. After award of the task order, the 

requirement to construct facilities for a brigade of 3,000 troops changed to facilities for a 

battalion of 750 troops. Consequently, a number of the buildings to be constructed for the 

battalion were removed from the task order’s scope of work. In addition, some costs incurred 

under task order 3 were carried forward to this task order. 

ECC completed construction of 38 facilities and transferred these facilities to AFCEE and 

MNSTC-I in July, August, and September 2005. ECC reported fieldwork completion in May 

2007. Figures 1 is the site of the Kirkuk Military Base as construction was beginning on task 

order 3. Figure 2 shows the construction under task order 3 in the background with the new 

construction for task order 16 beginning in the foreground. 
19

Figure 1—Site for Kirkuk Military Base (April 2004) 

Source: ECC. 

Figure 2—Construction under Two Task Orders at Kirkuk Military Base 

(December 2004) 

Source: ECC. 
20

Contract FA8903-04-D-8672, Task Order 32—Construct Facilities at Mosul/Tikrit 

ECC was to provide services including the planning, restoration, construction, and improvement 

of facilities for several military units in Iraq. The solicitation identified two Iraqi army facilities 

at one site for the 4th Division and five facilities at four sites for the 2nd Division; contracts for 

two of the four sites were to be awarded under modification 1 if funds became available. Shortly 

after task order 32 was awarded in September 2005, MNSTC-I revised the plan, deleting the 4th

Division facilities and implementing a more decentralized approach involving a number of 

forward operating bases instead of a centralized base for the 4th and 2nd Divisions. ECC was 

directed to construct and renovate 15 facilities at 9 sites in northern Iraq. 

ECC completed construction of 191 facilities and transferred the facilities to AFCEE and 

MNSTC-I. These facilities included barracks, headquarters buildings, dining halls, clinics, 

mosques, police buildings, jails, garages, maintenance shops, and other structures such as fences, 

sunshades, fueling stations, and security entrances. ECC reported delays due to security, 

weather, holiday, and subcontractor performance issues; however, the local Iraqi Commander 

accepted some of the buildings at the Makhumur site in September 2006, with ECC completing 

construction of some buildings as early as March 2006. For forward operating bases in Raniyah 

and Sulymaniyah, though the task order required construction completion by September 15, 

2006, ECC completed work in August 2006, and the Government of Iraq accepted the facilities 

in January 2007. 

Contract FA8903-04-D-8672, Task Order 36—Construct and Renovate 4th Division 

Headquarters and a 4th Division Troops Battalion at Kirkuk 

ECC was to provide plans and construction services for the research, planning, renovation, and 

construction of military facilities (including all structures, buildings, and systems) to support a 

new 4th Division Headquarters, Motorized Transport Regiment, and a Division Troops Battalion 

at Kirkuk Military Base. In August 2006, the task order was modified to add a forward operating 

base at Chamchamal, Iraq. Later, additional infrastructure and buildings were added at 

Chamchamal, and the motorized transport regiment building previously removed was added back 

to the task order. In February 2007, an extra large garrison support unit at Kirkuk was added to 

the task order. 

ECC completed construction of 174 facilities and transferred these facilities to AFCEE and 

MNSTC-I. Fourteen buildings and three other structures were completed at Chamchamal. 

Thirty-six buildings, 42 water storage tanks, and 11 septic tanks were completed at the 4th

Division Headquarters and 4th Division Troops Battalion. In addition, 57 garrison support unit 

buildings were completed at Kirkuk. 

Contract FA8903-06-D-8511, Task Order 13—Construct 3 Forward Operating Bases for the 

4th Division 

AFCEE awarded this task order to construct/restore/repair facilities for three light infantry 

battalions of the 1st Brigade, 4th Division, at three forward operating bases. After the award, one 

site was removed from the program because coalition forces occupied the site and could not 

vacate due to operational requirements resulting from a changed security situation, and a second 

base was changed to a different location. According to ECC, the site change involved a move 

from a well-established operating base with a coalition presence, security, and life support 
21

services to a base that offered very little infrastructure for renovation, with little Iraqi Army 

presence and no Coalition Forces. 

Representatives of Iraq’s Ministry of Defense, the U. S. Government, and ECC signed transfer 

documents for facilities at one forward operating base in March 2008 and for the second base in 

September 2008. Facilities completed and transferred included barracks, headquarters buildings, 

dining facilities, laundry facilities, medical centers, warehouses, and other supporting facilities 

and utilities. ECC reported that 46 completed facilities provide more than 22,000 cubic meters 

of space and that fence lines, waste/wastewater lines, and electrical generators were included in 

the construction. 

Contract FA8903-06-D-8511, Task Order 14—Construct 5th Division Iraqi Army Light 

Infantry Facilities at Forward Operating Bases Cobra and Gabe 

ECC was to provide plans and construction services for the research, planning, renovation, and 

construction of military facilities for the 5th Division Iraqi Army Light Infantry Facilities at 

Forward Operating Bases Cobra and Gabe. The project included construction of all structures, 

buildings, and systems. ECC completed construction of the buildings at the two bases at two and 

one-half times the estimated cost, despite a reduction in the scope of the work to offset the 

escalating cost associated with increased security and general requirements, including program 

costs. Security issues were a major factor in increased costs and delayed schedules on this task 

order. 

Contract FA8903-06-D-8511, Task Order 15—Construct Facilities to Support Iraqi Ground 

Forces at Camp Victory and at Camp Slayer 

ECC was to provide plans and construction services for the research, planning, renovation and 

construction of military facilities to support Iraqi Ground Forces at Camp Victory and Camp 

Slayer. The project included construction of all structures, buildings, and systems. In March 

2007, ECC requested an extension because the buildings to be renovated were occupied by 

coalition forces and unavailable for renovation until December 2007 at Camp Slayer and January 

2008 at Camp Victory. In addition, MNSTC-I decided that most of the buildings that had been 

slated for Camp Victory would be constructed at Camp Slayer. 

ECC completed construction of the buildings at Camp Victory and Camp Slayer at over two 

times the initial estimated cost. ECC completed construction of five buildings at Camp Victory 

and transferred those buildings to AFCEE and MNSTC-I. In addition, ECC completed all of the 

facilities at Camp Slayer. 

Contract FA8903-06-D-8511, Task Orders 40 and 41—Construct Air Force Facilities at 

Kirkuk 

These task orders were for construction of a training school for rotary and fixed-wing aircraft at 

the Kirkuk Regional Air Base, which provided facilities for the Iraqi Air Force. In June 2007, 

AFCEE awarded this work to a contractor that began work at the site but experienced delays and 

cost increases. AFCEE and the contractor mutually agreed to terminate the task order contract. 

In November 2007, AFCEE made a direct award for the work to ECC to ensure that government 

assets were protected and that an aggressive training schedule could be pursued to preclude 

jeopardizing Iraq’s flight training mission. 
22

Initial work at the air base included installing the underground storm water management, 

backfill/compaction, underground power distribution, water supply, and waste collection 

systems. The follow-on work included installing the power generation plant; billeting for 

officers, noncommissioned officers, and enlisted personnel; office buildings; training facilities; 

support buildings; and fixed wing/rotary aircraft hangars. ECC reported that it constructed 

19,978 square meters of billeting and office space to support instructors, Iraqi Air Force 

personnel, and students; re-skinned 1 large hangar; constructed a 20,000 square meter apron for 

16 helicopters; and constructed 12 fixed-wing aircraft sunshades. The completed facilities, as 

shown in Figure 3, were accepted by the Iraq government. 

Figure 3—Facilities at Kirkuk Regional Air Base (January 2009) 

Source: ECC. 

 
23

Management and Oversight Were Generally Sound 

but a Few Concerns Identified 

AFCEE awarded most of the task orders to ECC based on a competitive process and MNSTC-I 

and AFCEE shared management and oversight of ECC’s work on the task orders. AFCEE used 

contractors to support its contracting officers and project managers. Contract and project files, 

including contract modifications, project scope changes, invoices, and other documents provided 

extensive evidence of the management and oversight of ECC’s performance on the Iraq 

reconstruction task orders. In addressing U.S. government goals, ECC completed most 

construction using local subcontractors—an approach that had benefits, but also created 

challenges. ECC reportedly used more than 450 unique Iraqi subcontractors on its projects; 

about 55% of funds went to Iraq construction subcontractors. 

Concerns include an AFCEE-requested investigation that identified procurement irregularities by 

a MNSTC-I official, but not all of the recommended follow-up was accomplished. Also, the 

Defense Contract Audit Agency (DCAA) did not complete many key audits of ECC’s systems. 

DCAA has a key role in contract oversight by helping to ensure that ECC is reimbursed only for 

costs that are allowable, allocable, reasonable, and in accordance with the contract. However, 

without completed audits of ECC’s critical management systems (such as accounting, billings, 

and estimating) needed oversight was lacking. 

A final concern is that fees paid to ECC for modification cost increases appeared excessive. 

AFCEE generally awarded fees on modifications equal to the fee rate on the initial task order, 

even though fees were fixed and were to be negotiated for added work. Fees were awarded on 

cost increases that were not the result of added work. AFCEE officials believed increased fees 

were appropriate because changing work requirements and security issues drove cost increases.

Most Awards Were Competitive, but Sole Source Awards and 

Modifications Involved Significant Construction 

The Coalition Provisional Authority identified AFCEE’s competitively awarded contracts as the 

vehicle to accomplish urgent reconstruction work in Iraq. However, AFCEE’s competitively 

awarded indefinite delivery/indefinite quantity contracts were only the first step in what AFCEE 

refers to as its two-step competition process. After approval for work in Iraq, AFCEE began a 

second level of competition, notifying its contractors that the issuance of a competitive cost-plusfixed-fee task order was planned. It provided the contractors with a statement of work and a 

rough order of magnitude estimated cost of the work and requested that the contractors submit 

proposals by a specified date. Any of the approved contractors could submit proposals: 27 were 

awarded contracts in November/December 2003, and 20 were awarded contracts in April 2006. 

AFCEE officials used technical and cost criteria to select the contractor for each task order after 

evaluating the contractors’ proposals. 

AFCEE reported that 26 of the 38 task orders were awarded to ECC based on competitive 

selection. ECC was the only bidder on 4 competitive task orders, the low bidder on another 10, 

and was not the low bidder on the remaining 12 competitively awarded task orders. The 12 task 
24

orders that were awarded to ECC without competitive selection are referred to by AFCEE as 

“fair opportunity single source” awards. Tables 7 and 8 show additional details about 

competition for the 38 ECC task orders; those awarded without competition show no bidders. 

Table 7—Competition on 20 ECC Task Orders under the 2004 Contract 

Contract FA8903-04-D-8672 

Task 

Order Reconstruction Project 

No. of 

Bidders 

ECC Low 

Bidder? Comment 

03 Iraq Military Base at Kirkuk 6 No ECC 2nd

06 Utilities at Kirkush Military Base 3 No ECC 3rd

08 An Numaniyah Military Base, Phase I, Part B 6 No ECC 3rd

11 Southern School Repair 1 Yes - 

16 Brigade Facility at Kirkuk 2 Yes - 

17 Al Kut Police Academy Facilities 1 Yes - 

18 Camp India Facilities at Fallujah 1 Yes - 

19 Repair/Replace Iraq Schools 1 Yes - 

20 Harman Al Alil Military Base 2 No ECC 2nd

22 Renovate Base at Habbaniyah 6 Yes - 

23 Border Forts 8 and 9 0 - - 

24 Renovate Police Stations, Northern Region 0 - - 

27 Iraq Training Brigade at Kirkush 0 - - 

28 Renovate Facilities at Habbaniyah 0 - - 

32 Mosul/Tikrit Facilities 4 Yes - 

34 Northern Police Stations 4 Yes - 

35 Facilities at Kirkush 7 Yes - 

36 Facilities at Kirkuk 5 Yes - 

37 Facilities at Camp Majid 7 No ECC 3rd

48 Facilities at Kirkuk 0 - - 

Source: AFCEE competition data. 
25

Table 8—Competition on 18 ECC Task Orders under the 2006 Contract 

Contract FA8903-06-D-8511 

Task 

Order Reconstruction Project 

No. of 

Bidders 

ECC 

Low 

Bidder? Comment 

10 Facilities at Ramadi 4 Yes - 

12 Northwest Police Stations 6 No ECC 2nd

13 Facilities for 4th Division 3 No ECC 2nd

14 5th Division, Light Infantry Battalion 3 No ECC 2nd

15 Facilities for Iraq Forces, Camps Slayer and Victory 

at Baghdad 6 No ECC 2nd

19 Iraq Air Force Flight Operations at Kirkuk 0 - - 

24 Commando Company at Al Asad 3 No ECC 2nd

25 Diyala Police Stations 0 - - 

26 Facilities for Battalion Support, Gabe 0 - - 

27 Iraq Army Base Camp at Jelewea (Terminated) 3 Yes - 

32 Baqubah-Diyala Police Stations 3 Yes - 

33 Vehicle Maintenance Facility Babil (Terminated) 3 No ECC 2nd

34 Extra Large GSU Samara (Terminated) 5 No ECC 4th

35 Extra Large GSU Al Qaim (Terminated) 4 Yes - 

38 Housing at Akashaat 0 - - 

39 Housing at Qsar Amij 0 - - 

40 Iraq Air Force Facilities at Kirkuk 0 - - 

41 New Facilities and Modifications of Air Force 

Facilities at Kirkuk 0 - - 

Source: AFCEE competition data. 

As shown in Tables 7 and 8, ECC was awarded 12 task orders on which it did not submit the low 

bid; however, it submitted the low bid on some task orders that it was not awarded. According to 

AFCEE data, ECC submitted bids on 10 task orders for Iraq reconstruction in FY 2008, was the 

low bidder on 3, but was not awarded a task order. 

Federal Acquisition Regulation, Subpart 16.5, requires that for indefinite delivery contracts, the 

contracting officer must provide each contractor an opportunity to be considered for an order, 

and it sets out provisions for ensuring that each contractor receives a fair opportunity for orders 

under multiple award contracts. However, the Regulation recognizes the need for exceptions to 

the fair opportunity process when: 

• The need is so urgent that providing a fair opportunity would result in unacceptable 

delays. 
26

• Only one contractor is capable of providing the services required at the level of quality 

desired. 

• The order must be issued on a sole-source basis in the interest of economy and efficiency 

because it is a logical follow-on to an order already issued under the contract. 

AFCEE’s documents and contract files contained appropriate justifications when competition 

was not used in the award of ECC task orders. For example, under the 2006 contract, task orders 

40 and 41 for construction of the Iraqi Air Force flight training school at Kirkuk were awarded 

without competition. An AFCEE official’s October 2007 memorandum requested a waiver to 

the competition policy for this project, noting that the project had been awarded to another 

contractor that was being terminated for convenience due to significant construction delays; costs 

of about $8.58 million were incurred on the terminated effort. After this termination, AFCEE 

needed an expedited award to ensure that resources would be in place to secure the project site 

before the existing contractor’s departure. The memorandum cited the following key 

requirements that ECC could readily meet: 

• The first key requirement was the ability to expeditiously mobilize a security force to 

protect government-owned property worth millions of dollars that would be highly 

susceptible to theft or vandalism. ECC was working in the Kirkuk area and could 

immediately mobilize a security force. 

• The second key requirement was to capitalize on the existing AFCEE contractor’s 

relationship with local leaders and subcontractors. ECC was the contractor best 

positioned to execute the requirement. 

• The third key requirement was the capability to effectively execute an aggressive 

schedule, including moving personnel and delivering materials to the site. ECC had 

shown that capability. 

The memorandum also noted that ECC was ranked second on the original competition for the 

project and the other two contractors in the area had limitations. The memorandum’s bottom line 

was that the Iraq flight training mission was in jeopardy and the best chance of success was to 

contract with ECC, a known performer. Three additional AFCEE officials signed the 

memorandum, and the AFCEE Executive Director approved the direct award of a task order to 

ECC to complete the project at an estimated cost of $24 million. 

While $24 million was the estimated award amount, the U.S. government was able to fund only 

$5 million. ECC was asked to submit a proposal for what could be accomplished for that amount 

and a separate proposal for the remaining project costs. AFCEE planned that the first 

modification to task order 40 would add the required funding. However, because MNSTC-I was 

slow in providing the needed funds, the contracting officer awarded task order 41 to complete the 

project rather than modify task order 40. Accordingly, task order 41 was also awarded without 

competition to continue construction underway on task order 40. 

Modifications Added Significant Work to Task Orders Without Competition 

In addition to task orders awarded without competition, we identified a number of significant 

modifications that added additional work. Because these were modifications to existing task 
27

orders, they were essentially sole source awards. In some cases, the work specified in the 

modification appeared to be beyond the statement of work in the original task order. For 

example, the previously discussed Sulaymaniyah Recruiting Center added to task order 3 under 

the 2004 contract does not appear to be within the original task order statement of work. AFCEE 

noted that adding the work to ECC’s task order 3 was justified because it would represent the 

best value to the government by avoiding the expense of mobilizing another contractor in the 

harsh, high-risk, and dangerous environment near Kirkuk with the attendant coordination and 

learning curve issues. While AFCEE noted that it was a logical extension of the scope of task 

order, this $5 million project was awarded to ECC without competition. 

On task order 36 under the 2004 contract, the addition of a forward operating base at 

Chamchamal, Iraq, was a sole source award of work that added almost $10 million to the task 

order. At the initial modification, about $6.80 million was added for work at Chamchamal. 

Later an additional $3.00 million was added to complete work not funded under the previous 

modification. 

MNSTC-I and AFCEE Program Management and Oversight 

Generally Sound 

MNSTC-I and AFCEE were responsible for delivering needed facilities to the Iraqi Army, and 

they shared responsibility for management and oversight of the ECC task orders. Our 

examination of contract and project files, including contract modifications, project scope 

changes, invoices, and other documents provided extensive evidence of the management and 

oversight of ECC’s performance on the Iraq reconstruction task orders. AFCEE and ECC 

contract documents show that MNSTC-I developed the requirement for the facilities, controlled 

project funding, and accepted the facilities when construction was complete. MNSTC-I, needing 

contracting and construction management resources, turned over the project requirements to 

AFCEE, which solicited proposals from its preapproved contractors. Under the June 2005 

agreement between MNSTC-I and AFCEE, MNSTC-I was given the opportunity to review and 

evaluate contractors’ proposals during the selection and award process and was to have access to 

all award documents, daily progress reports, and other contract deliverables. MNSTC-I 

documents show that officials had ongoing oversight of the progress and issues on the projects 

being accomplished under ECC’s task orders. However, a 2008 investigation of a MNSTC-I 

official raised questions about procurement integrity violations. 

Investigation of Inappropriate Behavior by MNSTC-I Official 

In February 2008, MNSTC-I initiated an investigation of a MNSTC-I official’s alleged 

inappropriate involvement/relationships with contractors. The investigation was started after 

AFCEE’s Commander/Executive Director sent an email to the Chief of Staff, MNSTC-I 

reporting that several AFCEE personnel had commented on unprofessional behavior and 

possible inappropriate involvement/relationships by the MNSTC-I official. The 

Commander/Executive Director attached three written statements by AFCEE officials who had 

been in Iraq and had management/project responsibilities for Iraq reconstruction projects carried 

out by AFCEE contractors. Three days later, the Chief of Staff, MNSTC-I, appointed an 

investigating officer to conduct an informal investigation in accordance with Army Regulation 
28

15-6, which establishes investigative procedures, of the facts and circumstances surrounding 

allegations of inappropriate actions relating to construction contracts by the MNSTC-I official. 

The investigation was completed in March 2008, and based on 65 sworn statements and other 

evidence, the investigator identified 13 findings against the MNSTC-I official. In relation to 

SIGIR’s audit of ECC task orders for Iraq reconstruction projects, the more significant of those 

findings are that the official: 

• Exceeded contract authority by repeatedly directing contractors and subcontractors, 

without the contracting officer representative present, to perform work not in the scope of 

the task order and/or without the expressed approval of the contracting officer. 

• Accepted gifts of transportation on ECC contract aircraft for travel that was not related to 

authorized trips to ECC project sites. 

• Attended dinners, farewells, and barbeques at contractor villas that were possibly below 

the threshold of $20 per event but that together exceeded the allowable $50 limit per year 

per contractor. 

• Failed to contact the contracting officer when contractors were working “at risk”—

incurring costs and/or undertaking work beyond that authorized by the contract with the 

anticipation that subsequent modifications would authorize the work and/or provide 

additional funds. 

• Regularly declared that ECC were “His Boys” and that ECC was the only contractor that 

does it right. 

• Created a perception of giving preferential treatment to ECC in his words, actions, and 

approach. 

As a result of the investigation, the Commander, MNSTC-I, directed the reassignment of the 

investigated official. A recommendation was also made that AFCEE improve the support 

provided to MNSTC-I by (1) collocating an administrative contracting officer with AFCEE 

personnel to expedite procurement actions and reemphasizing and enforcing proper procurement 

processes/practices and (2) increasing the number of fully trained and experienced personnel. 

AFCEE officials, who were provided the investigative report, told us that the recommendation 

was considered but not implemented. They stated that in lieu of the recommended actions, 

AFCEE headquarters officials had increased their oversight of Iraq reconstruction activities and 

achieved greater independence for the Iraq activities by a physical separation of AFCEE and 

MNSTC-I personnel. A major recommendation from the investigation was to further review 

potential procurement integrity violations. Because this recommendation was not addressed, 

SIGIR Investigations will consider the extent to which additional investigations are warranted. 

AFCEE Used Contractors to Enhance Oversight Capability 

While AFCEE originally was expected to have a temporary role in Iraq reconstruction to meet 

the Coalition Provisional Authority’s urgent construction requirement, its role expanded when it 

awarded task orders totaling about $4.3 billion—with about $1.1 billion in task orders to ECC—

after MNSTC-I assumed responsibility for Iraqi Security Forces facilities. AFCEE was to 

maintain the capability to support MNSTC-I’s program/project execution and management 
29

requirements, including providing a contracting officer and contracting officer representatives. 

For facilities designated by MNSTC-I, AFCEE was to provide services that included planning, 

design, upgrade, renovation, repair, and/or construction. AFCEE was responsible for oversight 

of ECC’s performance on both the 2004 and 2006 contracts. 

As its temporary role changed to a longer term effort and the number and dollar amount of 

construction projects increased, AFCEE added to its capability for oversight of contractor 

performance through the use of contractors. To meet its increasing responsibilities to MNSTC-I, 

AFCEE supplemented its staff with contract and temporary employees. AFCEE operated on the 

concept that government staffing could be kept to a minimum by leveraging the contracting 

officer representative with contractor support and quality assurance personnel. AFCEE officials 

stated that contractor staffing was continually assessed and adjusted as needed and that 

contractor support increased as the number of AFCEE task orders for Iraq reconstruction grew. 

Likewise, AFCEE’s staffing for the Iraq reconstruction effort decreased with the decrease in 

reconstruction requirements. 

• AFCEE project management was provided by temporary government employees, Air 

Force employees, and/or the on-site contracting officer representatives in Iraq. These 

personnel were assigned by AFCEE’s Headquarters and were detailed to Iraq on a 

rotating basis. In addition, government employees from other AFCEE sections were 

appointed as contracting officer representatives and were detailed on a rotating basis to 

Iraq for 4 months. AFCEE maintained two military and four civilian personnel in Iraq. 

The contracting officer representatives’ duties and responsibilities included (1) 

monitoring technical contracts, (2) providing technical reviews of contractor’s proposals 

and reviewing and signing invoices, (3) inspecting and accepting the completed work, 

and (4) representing the U.S. government during task order meetings. The letter noted 

that the representative did not have the authority to change the pricing, quantity, quality, 

or any term or condition of the basic contract or task order. 

• Versar Inc., under an AFCEE indefinite delivery/indefinite quantity contract, provided 

quality assurance services with personnel at Iraq reconstruction projects. During 2007, 

the contractor provided over 300 quality assurance personnel (expatriate, third-county, 

and Iraqi nationals) to support AFCEE’s reconstruction program. According to AFCEE, 

these quality assurance personnel acted as the “eyes and ears” for its contracting officer 

and provided conventional quality assurance services for Iraq construction projects. The 

services included, but were not limited to, contractor performance monitoring, 

management and inspection services, job-site evaluations, contractor-payment reviews, 

submittal reviews, plan reviews, and construction documentation. Inspection services 

included routine, pre-final, and final walk-through assessments of the projects. 

• Portage Environmental Inc. and Team Integrated Engineering, Inc., provided voucher 

reviews, project management support, and construction documentation. Both had 

personnel assigned to AFCEE Headquarters, and one had personnel on site in Baghdad. 

The following sections discuss the management and oversight provided by quarterly 

performance ratings, quality assurance, and voucher reviews. 
30

Providing Performance Ratings on Task Orders 

The AFCEE project manager was responsible for providing AFCEE management with a 

quarterly contractor performance rating on each task order. These ratings were for internal 

management purposes and were not always shared with the contractor. Performance ratings 

were based on three factors—cost, schedule, and quality—and the project manager assigned a 

color rating for each performance factor: blue for excellent and exceeding expectations, green 

for good and meeting expectations, yellow for marginal, and red for unacceptable and not 

meeting the requirements. An excellent or unacceptable rating required a narrative justification, 

and a marginal or unacceptable rating on any of the three factors resulted in an overall rating of 

marginal or unacceptable. A contractor’s rating on a task order could change from one quarter to 

the next. The project manager used ECC’s daily and weekly progress reports, task progress 

reports, time lost logs, and payment vouchers in assessing the contractors’ performance 

regarding cost and schedule. In addition, the project manager used daily quality assessment 

reports prepared by the quality assurance contractor in assessing the contractor’s overall 

performance regarding quality. In some instances, the project manager who was stationed in Iraq 

also performed site visits and inspected facilities. 

On 20 of the 34 task orders (excluding the 4 that were terminated for convenience), ECC 

primarily received good performance ratings on the task orders with a few excellent ratings. On 

task order 6 under the 2004 contract, ECC received an excellent rating for its approach to tying 

the water and sewer system at the Kirkush Military Base into adjacent projects to create a 

comprehensive system. The rating also noted that the on-site Commander cited ECC as the 

easiest, most responsive, and most reliable company with which he had dealt. On task order 12 

under the 2006 contract, ECC received an excellent rating for its performance in the 

construction/renovation of 13 police stations in northwest Iraq. The comment noted that the sites 

were completed under budget and on schedule despite many unforeseen time impacts. 

On the remaining 14 task orders, ECC received a marginal or unacceptable rating for at least one 

quarter during the construction period. For 6 of the 14 task orders, ECC received a marginal or 

unacceptable rating for two quarters in a row. ECC’s worst ratings were on task order 10 under 

the 2006 contract for which it received marginal or unacceptable ratings for six quarters. ECC 

noted that major performance problems on this task order stemmed from conflicts among 

subcontractors who were attempting to exert control over who received work. This resulted in 

infighting and unscrupulous practices among subcontractors who conducted intimidation 

campaigns against workers of other subcontractors. 

ECC’s worst ratings on the nine task orders we selected for review were for work on task order 

32 under the 2004 contract and on task order 14 under the 2006 contract. On task order 32, ECC 

received a marginal rating for the first quarter of 2007 and the second and third quarter of 2008. 

For the second quarter of 2008, ECC was notified of noncompliance with the approved quality 

control plan, which resulted from numerous deficiencies, including concrete columns with 

exposed rebar and honeycombing, the use of rebar to cover gaps in welding, a lack of proper 

column anchors, and electrical installations that did not meet code. The project manager also 

reported that ECC had a pending $6 million cost-to-complete request that was partly due to 

failure to control subcontractors and cost escalation because of various delays. In the next 

quarter, the project manager again reported unsatisfactory quality control performance; a “do not 
31

complete notice” was issued because electrical wires and projector lights were being installed 

without approved drawings and submittals. In addition, the manager reported cracks on the 

interior wall plaster and tiles but noted that ECC had corrected the previous quarter’s concrete 

and welding deficiencies. These deficiencies reported by the project manager to AFCEE 

management were consistent with the information we reviewed in other contract and project 

files. ECC noted that it implemented improvements in its quality control program and that the 

succeeding quarterly ratings indicated that the problems had been corrected. 

On task order 14, ECC received a marginal rating for the first and second quarter of 2008 based 

on cost and schedule. For the first quarter, the project manager reported (1) inadequate recovery 

from schedule delays because the Iraqi subcontractor did not have sufficient manpower and/or 

skilled labor to maintain the schedule and (2) slow performance, which negatively affected 

schedules and costs. As a result, the project was 3 months behind schedule and the cost 

increased by $8.7 million. In the second quarter, the project manager reported that ECC 

continued to be 3 months behind schedule and that the cost increase was $12.7 million. 

Quality Assurance and Voucher Review of the Project 

Extensive documentation showed that AFCEE’s contractors, Versar and Portage Environmental, 

exercised oversight of ECC’s activities and performance and worked directly with the AFCEE 

project manager to ensure quality construction and accurate vouchers. For example, Versar 

prepared daily quality assurance reports under all the task orders reviewed in detail. On task 

order 14 under the 2006 contract for the construction of two forward operating bases, the 

contractor had two quality assurance inspectors assigned to the bases. These inspectors 

submitted the first report on March 9, 2007, and the last report on August 11, 2008. Our review 

of the daily reports showed that the quality assurance inspectors were actively involved in the 

oversight and approval of the facilities being constructed. The inspectors maintained a 

discrepancy and noncompliance log and used this log to ensure that ECC had corrected any 

noted discrepancies. In addition, the inspectors were not to sign the final approval for a building 

or facility until all noted discrepancies had been corrected. AFCEE’s and ECC’s task order files 

show that AFCEE had quality assurance personnel and processes in place to provide required 

oversight of ECC’s construction projects. 

Personnel of AFCEE’s contractor, Portage Environmental, were actively involved in the review 

and approval of ECC vouchers submitted for the task orders. Personnel maintained a log of the 

contract award amount, modifications to the contact award, vouchers submitted, vouchers 

reviewed, and discrepancies noted. In addition, the personnel followed up with ECC on 

discrepancies identified and informed the AFCEE project managers of the status of the reviews 

and follow-up. AFCEE’s review procedures required the reviewers to examine the vouchers for 

reasonableness of labor and examine supporting documentation for subcontractor, travel, and 

other direct costs identified on the voucher. As an example, in the review of voucher 36 for task 

order 14 under the 2006 contract, reviewers requested timesheets for two ECC personnel and a 

subcontractor’s invoice to support a charge of $576,918. The files show that the reviewers 

identified and discussed with ECC a number of questions about the validity and support for 

costs. 
32

DCAA Extensively Audited ECC, but Critical Audits Were Not 

Completed 

DCAA conducted about 40 audits of ECC’s financial systems and costs incurred under AFCEE’s 

Iraq reconstruction task orders. However, some audits of ECC’s major systems, such as 

accounting, purchasing, and estimating, were completed while ECC was classified as a small 

business. DCAA officials stated that these efforts were limited audits compared to audits for 

other businesses. DCAA has major systems audits in process, but these efforts will address 

ECC’s current environment and systems, not the ECC environment and systems that existed for 

the Iraq reconstruction task orders. Completed system audits, incurred cost audits, and forward 

pricing audits are keys to ensuring that ECC is reimbursed only for costs that are allowable, 

allocable, reasonable, and in accordance with the contract. ECC officials expressed some 

frustration that DCAA auditors had spent thousands of hours on audits that were to have been 

completed in fiscal years 2008 and 2009, but planned reports were not issued. In September 

2009, DCAA identified 14 ECC audits as “in process.” However, DCAA officials later indicated 

that some of the planned ECC audits were cancelled, but some of the planned work from those 

audits was being combined with other audits. They also noted that increased transaction testing 

will be done to mitigate risk to the government. 

DCAA’s audits of ECC have produced findings and ECC has responded by revising policies and 

procedures to strengthen internal controls and improve documentation of incurred costs. DCAA 

audits have identified more than $5.71 million in questioned costs. A major unresolved issue 

identified in DCAA’s 2005-2006 incurred cost audit is the reasonableness of ECC’s “lift” paid 

for Iraq direct labor charges. The Defense Contract Management Agency’s administrative 

contracting officer (ACO) is to make a decision on this issue that could involve as much as $3 

million in ECC charges. Further details on DCAA’s audits follow. 

Accounting System: In July 2003, DCAA reported that ECC’s accounting system was 

inadequate and needed improvement in documenting and adjusting indirect expense rates in its 

public vouchers and progress payment requests. However, DCAA reported in November 2003 

that ECC had corrected all deficiencies and that its accounting system was adequate for 

accumulating costs. In July 2007, DCAA reported that ECC’s Cost Accounting System 

Disclosure Statement adequately describes its cost accounting practices used for government 

contracts. DCAA representatives stated that these audit efforts had been limited and that a more 

comprehensive audit of the ECC accounting system, including its control environment, is in 

process; they estimate a report on those efforts will be issued in March 2010. ECC officials 

stated that DCAA started an accounting system audit in February 2007 and that field work and 

management reviews were completed around July 2008, but a report was not issued and a new 

audit was begun in June 2009. In September 2009, DCAA officials stated that the ongoing audit 

would be cancelled but that a new audit to address both ECC’s accounting system and billing 

system would be started. 

Purchasing System: In October 2004, DCAA reported that ECC’s subcontracting system and 

related internal control policies and procedures were generally adequate. DCAA examined 

whether ECC’s subcontracting system and related internal controls—with a focus on 

subcontracting in Iraq—complied with applicable laws and regulations, were effective in 

complying with applicable laws and regulations, and were adequate and operating effectively. In 
33

response to DCAA’s suggestions, ECC revised its checklist to identify how subcontractor 

quantities are verified (visual inspection, inventory count, measurement or survey, equipment 

logs, bill of lading sign in/out sheets, weight tickets, photographs, and other) and required the 

checklist to be used on all invoices over $50,000. Also, in April 2009, the Defense Contract 

Management Agency recommended continuing approval of the ECC purchasing system based on 

its completed review. DCAA had a purchasing system audit in process, but in September 2009 

DCAA officials stated that the audit had been canceled and an audit focused on ECC’s 

subcontract management would be done. 

Billing System: In September 2006, DCAA found that ECC’s billings and related procedures 

for the 2004 contract were adequate. DCAA reviewed selected public vouchers submitted on the 

contract and verified that the vouchers were prepared in accordance with the contract billing 

instructions. Later, in October 2008, DCAA determined that ECC’s billing system was 

inadequate in part because (1) ECC did not always adjust billed fees when it adjusted billed costs 

due to rate adjustments and (2) its contract briefs contained errors regarding contract costs and 

fees. ECC disagreed with DCAA’s findings. DCAA’s findings do not appear to have had a 

significant effect on the accuracy and completeness of ECC’s billing on AFCEE’s task orders. 

DCAA had a billing system audit in process, but this separate audit has been cancelled, and 

portions of the billing system audit will be done as part of the accounting system audit. 

Estimating System: In October 2002, DCAA determined that ECC’s estimating practices for 

preparing pricing proposals and developing indirect expense rate forecasts were inadequate. 

ECC concurred with the DCAA finding and implemented corrective actions. In March 2004, 

DCAA found that ECC’s estimating system was adequate for developing accurate, current, and 

complete cost estimates. DCAA has an in process an additional audit of ECC’s estimating 

system that it expects to complete by the end of 2009. 

Compensation System: In June 2006, DCAA reported that ECC’s compensation system and 

related internal control policies and procedures were inadequate in part because ECC did not (1) 

establish and maintain reasonable employee wages and salaries that are consistent with services 

provided and (2) comply with FAR provisions for compensation for personal services. DCAA 

identified ECC claims in 2004 of $93,591 of expressly unallowable and $883,930 of 

unreasonable compensation for executives. ECC agreed with DCAA and withdrew the amount 

from its payment requests. DCAA has an audit of the ECC compensation system in process and 

expects to complete it in March 2010. 

Cumulative Budget Variance Reports: In July 2005, DCAA determined that ECC’s 

cumulative budget variance reports were inadequate in part. DCAA reported that policies and 

procedures do not ensure the production of accurate data. While ECC’s books and records 

supported the reported financial data, DCAA was unable to determine whether the estimates at 

completion were realistic and reasonable because ECC did not adequately document the basis of 

its estimates and perform any variance analyses. ECC agreed with DCAA’s recommendation to 

use different report formats and revised cost control policies and procedures and the overall cost 

reporting system. DCAA has a cost/schedule status report audit in process at ECC and expects 

to complete it later in 2009. 
34

In separate audits, DCAA found ECC’s information technology control system, labor system, 

budgeting and planning system, Iraq project management office cost allocation system, and Iraq 

cash disbursement internal controls to be adequate. DCAA also found ECC’s timekeeping 

system for its employees assigned to Iraq to be adequate for calendar years 2005 through 2008. 

DCAA verified through physical observation (floor checks) in Iraq that (1) ECC consistently 

complied with its timekeeping system policies and procedures for recording labor charges and 

(2) ECC employees were actually at work, performed in assigned job classifications, and charged 

time to the appropriate jobs. 

DCAA audited ECC’s billed direct costs under the 2004 contract for four different periods from 

the award date to March 2006. The audits, which included reviews of randomly selected 

vouchers, were to determine whether billed amounts were allowable, allocable, reasonable, and 

in accordance with the contract. In all four audits, DCAA concluded that some submitted direct 

costs were unallowable, unallocable, and unreasonable (see Table 9). DCAA has in process two 

additional incurred cost audits of task orders under the 2004 and 2006 contracts. 

Table 9—DCAA’s Questioned Costs on ECC’s Billed Direct Costs under the 2004 

Contract 

Questioned Cost Dollar Value Comment Results 

Audit of Period 1 from Award to June 30, 2004 

Iraq project management 

office 

$319,394 Understated Corrected in January 2005 

Audit of Period from July 1, 2004, to December 31, 2004 

Equipment $90,560 Overstated Corrected in September 2005 

Equipment -- Unauthorized purchase 

of vehicle 

Vehicle identification number 

corrected 

Audit of Period from November 1, 2004, to March 31, 2006 (selected task orders) 

Iraq direct labor (lift) $704,023 Application of hazard 

pay and lifts 

Referred to Administrative 

Contracting Officer 

State sales taxes $118,800 Unallowable Contractor refunded the 

$118,800 

Audit of Period from June 2004 to March 2006 (selected task orders) 

Iraq direct labor (lift) $439,888 Application of hazard 

pay and lifts 

Referred to Administrative 

Contracting Officer 

Travel $19,555 Missing documentation Travel documentation 

improved, but system 

improvements needed 

Source: SIGIR analysis of DCAA reports. 
35

The total questioned cost shown in Table 9 is $1.69 million; about a fifth of this amount is for 

costs that ECC understated. The most significant questioned cost results from DCAA’s position 

that the international “lift” benefits (pay premiums) paid by ECC in its Iraq direct labor charges 

are excessive. These lifts for ECC employees in Iraq include 5% of base pay for all hours 

worked, 25% of base pay for all hours worked for an environmental lift, and 25% of base pay for 

all hours worked for hazard/war pay. The employees receive these allowances if warranted 

based on ECC’s written policies and procedures. DCAA questioned ECC’s lifts in its last two 

audits and stated that the problem is systemic and would result in future questioned costs. 

DCAA and ECC officials believe that the amount involved could be as much as $3 million. 

This issue arose in a DCAA audit with ECC’s January 1, 2005, change in lift policy to apply the 

rates to all hours worked each week (expected work week hours are 84) instead of applying the 

lifts to only the first 40 hours each week. DCAA did not question the percentages but questioned 

the application to more than the first 40 hours per week, which resulted in more than doubling 

the lift charges to the U.S. government. DCAA maintained that ECC did not provide data to 

justify the change in policy. ECC disagreed with DCAA’s exception and provided a number of 

reasons for its policy change. It also including a letter from an AFCEE contracting officer 

stating that AFCEE finds ECC’s approach reasonable in relation to other AFCEE contractors and 

that ECC applies the uplift very conservatively. ECC provided rebuttal data to DCAA in 

October, November, and December 2008, and DCAA provided data to the ACO who is 

reviewing the issue and expected to issue a decision on the reasonableness of these costs. 

DCAA also audited ECC’s forward pricing indirect rates and factors for calendar years 2004-

2005; calendar years 2005-2006; calendar years 2006-2007; and calendar years 2007-2008. ECC 

uses these indirect rates and factors in preparing cost proposals and is paid using these rates and 

factors. When DCAA completes final indirect rate audits, adjustments are made in the amounts 

paid. DCAA audits of ECC’s forward pricing indirect rates and factors identified both 

underestimated and overestimated rates. For example DCAA’s calendar years 2005-2006 audit 

found that ECC’s overhead and general and administrative bases were underestimated but that its 

fringe and general and administrative pools were overestimated. DCAA concluded that ECC’s 

proposal was acceptable for negotiation of fair and reasonable rates and factors, as adjusted by 

audit results. 

DCAA audited ECC’s final indirect rates for calendar years 2002, 2003, 2004, and 2005 and has 

in process audits on ECC’s final indirect rates for calendar years 2006 and 2007. Table 10 shows 

questioned costs from the completed audits. 
36

Table 10—DCAA’s Questioned Costs on ECC’s Iraq Reconstruction Task Orders 

Questioned Cost Dollar Value DCAA Comment ECC comment 

Audit Report for CY 2002 issued April 2005 

Loss on sale of laboratory assets $379,606 Questionable Concurred 

State income taxes $74,899 Not allocable Partially concurred 

Bonus payment $50,000 Unallowable Concurred 

Audit Report for CY 2003 issued September 2005 

Consultant costs $81,263 Improper allocation Concurred 

State income taxes $8,424 Not allocable Nonconcurred 

Compensation $61,162 Questionable Concurred 

Audit Report for CY 2004 issued September 2006 

Executive labor and bonus $977,521 Unallowable and 

unreasonable 

Concurred 

Nonexecutive bonus $400,000 Unallowable Accounting entry 

corrected 

Applied fringe benefits $360,635 Questionable Concurred 

State income taxes $369,057 Unallowable Concurred 

Capital cost of money $78,139 Unallowable Concurred 

Audit Report for CY 2005 issued October 2007 

Consultant costs $187,348 Unsupported and 

unallowable 

Concurred with $119,848, 

but not with $67,500 

Bonus costs $105,000 Inadequately 

supported and 

unallowable 

Concurred with $55,000 

but not with $50,000 

Travel costs $70,789 Undocumented and 

unallowable 

Disagreed with almost the 

entire amount 

Executive incentive costs $559,883 Unallowable Disagreed 

Intermediate pool travel costs $256,588 Unsupported Disagreed 

Source: SIGIR analysis of DCAA reports. 

The total questioned cost shown in Table 10 is $4.02 million. In addition to the questioned cost, 

the ACO imposed a penalty of $78,616 for ECC’s inclusion of expressly unallowable executive 

compensation costs of $93,591 in its calendar year 2004 incurred cost claim. ECC requested a 

waiver of the penalty that was denied. The ACO has also considered a penalty for ECC’s 

incurred cost claims in calendar year 2005; however, this will not be determined until the 2006 

audit is completed. Also, because of disagreements between ECC and DCAA on questioned 

costs in the calendar year 2005 audit, ECC’s indirect rates for 2005 will be ACO-negotiated 

instead of audit-determined rates arrived at by ECC and DCAA. 
37

Iraqi Subcontractors Offered Challenges and Benefits 

AFCEE’s and MNSTC-I’s goals have emphasized that most construction was to be 

accomplished through local Iraqi subcontractors. AFCEE wanted to expand awards to Iraqi 

contractors to help build strong relationships with Iraqi subcontractors and laborers by 

transferring skills, teaching engineering techniques, and encouraging stability through the 

employment of locals. To help achieve MNSTC-I’s and AFCEE’s goals, ECC reported using 

over 450 different Iraqi subcontractors on its Iraq’s projects and paying about 55% of the funds 

under its task orders to Iraqi construction subcontractors. 

While using Iraqi subcontractors transferred skills, employed locals, and had other general 

benefits, our review of contract files and discussions with ECC officials indicated that the use of 

Iraqi contractors also presented many challenges. For example, about 2 months after its first 

Iraqi reconstruction effort—task order 3 under the 2004 contract—ECC issued a notice to an 

Iraqi subcontractor for lagging performance and allowed a 3-day period to correct performance. 

Within a few days, ECC contracted with a replacement contractor but did not finalize details on 

the statement of work and the dollar amount. ECC dealt with claims and issues from these two 

subcontractors throughout the task order. 

ECC also reported performance problems with Iraqi subcontractors on task order 41 under the 

2006 contract. In November 2008, near the completion of the task order, ECC notified a 

subcontractor that had refused to perform because of a claim dispute that if performance was as 

outlined in the notice, it would release funds owed and reconvene negotiations to settle the claim. 

Within the same month, ECC also issued a notice to another subcontractor for failure to perform. 

ECC set out specific work to be performed by a specified date and stated that it would begin 

imposing liquidating damages if substantive work was not performed by that date. 

We identified other instances in which ECC had subcontractor performance problems. For 

example on task order 32 under the 2004 contract, the Iraqi subcontractors did not complete the 

facilities within the specified performance period, increasing the security and program 

management costs. At one forward operating base, two Iraqi subcontractors were terminated for 

default for inadequate performance and for failure to maintain the required manpower. The files 

show that these subcontractors were given numerous notices of poor performance and inadequate 

labor force. The first subcontractor was terminated about 4 months after the required facility 

completion date, and the second subcontractor was terminated about 7 months after the required 

completion date. ECC awarded contracts to another Iraqi subcontractor for the terminated work, 

but the site was not completed until February 2008, about 16 months after the initial target date. 

ECC officials stated that the problems that arose with Iraqi subcontractors covered the entire 

spectrum of effort across construction projects. Issues with Iraqi subcontractors included: 

• Schedule and design 

 Difficulty producing designs; some lacked experience working to designs. 

 Little experience in preparing and working to a schedule. 

 
38

• Safety 

 Little or no experience with incident reporting and investigation and no understanding 

of the value of such efforts. 

 Equipment was in poor condition without required safeguards. 

• Quality 

 Few had an established quality control management system in place and attempts 

were made to replace approved materials with inferior or used materials. 

 Labor force was not qualified for needed work, and skilled employees left to work 

outside Iraq. 

• Overall business issues 

 Many contractors had been hastily created because of the flood of contracting dollars 

and did not have the needed organization and were poorly financed. 

 Contractors often did not read or understand their subcontract agreements and 

statements of work. 

Both AFCEE and ECC officials discussed efforts undertaken to address these issues. AFCEE 

noted that it had developed an Iraq Construction Standard in November 2006 and had 

emphasized mentoring and training efforts to transfer skills to Iraqi engineers and laborers. 

ECC officials further stated that they provided extensive quality control and safety training as 

well as training and mentoring on construction techniques. ECC also stated that it provided 

some financial assistance and identified other workarounds when subcontractors encountered 

financial difficulties. 

Despite some problems, ECC officials also noted benefits from the use of Iraqi subcontractors. 

For example, they received many bids relatively quickly, thereby providing healthy competition 

on their firm-fixed-price contracts. They also noted the ability to hire a large work force to meet 

tight schedules. ECC officials added that the high levels of competition and relatively cheap 

labor rates sometimes resulted in good per unit prices for construction. 

Award Fees Appear Excessive 

ECC was awarded $80.36 million in fees—profit—on the 38 Iraq reconstruction task orders; 

$40.55 million of that, or slightly more than half of the fees, was earned on modifications to the 

task orders. Some of the award fees on modifications appear excessive because the ECC task 

orders specified that fixed fees were to be increased only for “added work,” but on some task 

order modifications, ECC received fees on cost increases for other reasons. The cost increases 

were due to government delays, security issues, and, in some cases, contractor performance 

issues. Quantifying the amount of potentially excessive fees would require an analysis of the 

reasons for cost increases on each modification. Further, the amount of excessive fees would be 

essentially a moot point because (1) the AFCEE contracting officers could be considered to be 

exercising the wide latitude in business judgment recognized in the Federal Acquisition 
39

Regulation and (2) the fee decision on each modification was finalized in a negotiated agreement 

with ECC. 

The ECC task orders were cost-plus-fixed-fee with fee rates on the initial task orders at 10% of 

the estimated cost, which decreased to 6% of the estimated cost on the later task orders. 

According to the Federal Acquisition Regulation, subpart 16.306, the fee on a cost-plus fixed-fee 

contract is negotiated at the start and is fixed—the fixed fee does not vary with actual cost but 

may be adjusted as a result of changes in the work to be performed under the contract. Section 

16.102 of the regulation states that the cost-plus-a-percentage-of-cost system of contracting shall 

not be used (see 10 U.S.C. 2306(a) and 41 U.S.C. 254(b)). AFCEE’s task orders with ECC 

provided that the fixed fee “may be increased or decreased only by negotiation and modification 

of the contract for added or deleted work.” Thus, the language in AFCEE’s task orders was in 

accordance with the regulation. However, according to ECC-supplied data, despite significant 

increases in the costs of task orders and delayed delivery of facilities, ECC continued to be 

awarded additional fees on cost increases equal to or slightly less than the percentage fee 

established for the task order. Such increases might be appropriate if all cost increases are the 

result of “added work” and are negotiated with the contractor. However, many cost increases 

were due to government delays, security issues, or other unforeseen conditions. Moreover, some 

cost increases were clearly identified as attributable to contractor performance, not to 

government changes in requirements or scope. 

According to Federal Acquisition Regulation, subpart 1.602.2, contracting officers should be 

allowed wide latitude to exercise business judgment in carrying out their responsibilities. In 

discussions with AFCEE contracting officials as to whether the fees were justified, one official 

said that increased security drove much of the increased cost increases and an increased fee was 

generally awarded for these costs. Another official stated that each task order modification has a 

story and that contracting officials do their best to determine fairness and reasonableness on each 

contracting action, sometimes getting it right and sometimes not. The official stated that he had 

briefed buyers and contracting officers on the need to do a more thorough job when reviewing 

costs to complete modifications, and deciding on a proposed fee, if any. 

Tables 11 and 12 show the percentage fee established at the award of the task order and the 

calculated percentage fee earned by ECC on the obligations as of July 31, 2009, for the 2004 and 

2006 contracts, respectively. 
40

Table 11—Initial and Final Percentage Fees on ECC Task Orders under 2004 

Contract ($ millions) 

Contract FA8903-04-D-8672 

Task 

Order Reconstruction Project 

Initial 

Obligations % Fee

7/31/2009 

Obligations 

% Final 

Fee

03 Iraq Military Base at Kirkuk $47.50 10.00% $74.85 9.48%

06 Utilities at Kirkush Military Base 16.96 10.00% 35.95 9.64%

08 An Numaniyah Military Base, Phase I, 

Part B 34.39 10.00% 57.41 9.47%

11 Southern School Repair 29.19 10.00% 29.18 10.16%

16 Brigade Facility at Kirkuk 38.24 10.00% 43.67 10.04%

17 Al Kut Police Academy Facilities 7.52 10.00% 26.12 8.04%

18 Camp India Facilities at Fallujah 48.62 9.00% 84.70 8.94%

19 Repair/Replace Iraq Schools 3.10 10.00% 6.90 10.01%

20 Harman Al Alil Military Base 5.49 8.00% 35.44 7.80%

22 Renovate Base at Habbaniyah 15.57 7.96% 63.48 8.06%

23 Border Forts 8 and 9 2.48 6.00% 3.81 6.13%

24 Renovate Police Stations, Northern 

Region 2.88 8.00% 2.96 9.11%

27 Iraq Training Brigade at Kirkush 9.30 8.00% 8.95 8.70%

28 Renovate Facilities at Habbaniyah 7.30 8.00% 55.15 8.00%

32 Mosul/Tikrit Facilities 18.41 8.00% 98.13 7.95%

34 Northern Police Stations 13.93 8.00% 13.93 8.00%

35 Facilities at Kirkush 25.88 6.00% 47.69 5.63%

36 Facilities at Kirkuk 10.57 8.00% 35.78 7.91%

37 Facilities at Camp Majid 35.33 6.00% 57.73 6.00%

48 Facilities at Kirkuk 0.50 - 0.50 -

Source: AFCEE and ECC contract file data. 
41

Table 12—Initial and Final Percentage Fees on ECC Task Orders under 2006 

Contract ($ millions) 

Contract FA8903-06-D-8511 

Task 

Order Reconstruction Project 

Initial 

Obligations % Fee

7/31/2009 

Obligations 

% Final 

Fee

10 Facilities at Ramadi $27.51 6.00% $57.57 4.91%

12 Northwest Police Stations 19.55 6.005 26.47 6.00%

13 Facilities for 4th Division 21.19 6.00% 39.31 5.60%

14 5th Division, Light Infantry Battalion 17.17 6.38% 42.56 5.59%

15 Facilities for Iraq Forces, Camps Slayer 

and Victory at Baghdad 23.07 6.00% 50.77 5.77%

19 Iraq Air Force Flight Operations at Kirkuk 4.49 6.00% 5.75 6.00%

24 Commando Company at Al Asad 13.74 6.00% 17.87 6.00%

25 Diyala Police Stations 9.82 6.00% 10.36 6.00%

26 Facilities for Battalion Support, Gabe 15.00 6.00% 14.86 6.00%

32 Baqubah-Diyala Police Stations 9.32 6.00% 8.71 6.41%

38 Housing at Akashaat 10.39 6.00% 13.88 5.61%

39 Housing at Qsar Amij 10.62 6.00% 13.52 5.55%

40 Iraq Air Force Facilities at Kirkuk 4.96 6.00% 4.96 6.00%

41 New Facilities and Modifications of Air 

Force Facilities at Kirkuk 23.50 6.00% 30.46 6.00%

Source: AFCEE and ECC contract file data. 

The largest difference between the initial fee rate and the final rate was on task order 17 under 

the 2004 contract for facilities at Al Kut Police Academy. The initial fee rate was 10%, with 

obligations of $7.52 million, and ECC received an 8.04% fee with obligations at $26.12 million. 

While this task order was not one selected for detailed review, our review of files to determine 

why the difference in original fee rate and final rate showed that on the first major modification, 

a fee of 9% was awarded and that an 8% fee was awarded on three small modifications. (These 

lower rates appeared consistent with the gradual reductions in fee rates on ECC task orders, 

which started at 10% and decreased to 6%.) On the final modification for $3.16 million—

identified as a cost to complete—no fee was awarded. 

The following paragraphs provide further information on potentially excessive fees for four task 

orders. 

Contract FA8903-04-D-8672, Task Order 3, Military Base at Kirkuk 

Three modifications on this task order show the range of AFCEE actions when considering fees 

on modifications. On the first two modifications, AFCEE provided fees on costs that were not 

the result of added work. On the third modification, the contracting officers noted that ECC had 

already been provided fees for cost growth and did not provide additional fees. 
42

• Modification 2 was made because of changed conditions that warranted adjustments; 

some increases were due to delays in contract award, changes in location, and a 

government miscalculation of electric power requirement. However, other increases 

were due to costs for construction, water utilities, and power generation that were 

significantly more than the contractor originally estimated. AFCEE accepted a fixed fee 

of 10% on the total cost of the modification (total cost of about $12 million and a fee of 

$1.20 million). The files do not indicate that AFCEE considered or negotiated lower 

fees. 

• On modification 3, a preliminary price negotiation shows that the Defense Federal 

Acquisition Regulation Supplement’s weighted guidelines4 were used to develop an 

objective fixed fee of 7.55% instead of the 10% proposed. However, the final price 

negotiation memorandum states that the contracting officer accepted the 10% proposed 

fee even though the weighted guidelines do not support the fee. The memorandum states 

that the guidelines do not take into account the heightened security and risk factors 

associated with Iraq. The cost of modification 3 was $2.54 million, including a fixed fee 

of $250,000. If the 7.55% developed with the guidelines had been used, the fee would 

have been about $60,000 less. 

• On modification 8, AFCEE’s contracting officer took a tougher position. The 

preliminary price negotiation memorandum for this modification, which was to provide 

funds to settle a claim submitted by an ECC subcontractor, notes that ECC proposed an 

8% fee on the estimated cost of $4.62 million, or a fee of $0.37 million. The contracting 

officer determined that no additional fee should be awarded because ECC had total 

control and responsibility over the subcontractor’s work and had already captured $2.17 

million in fees on three modifications for cost growth on the task order. Denial of the fee 

on this modification was the reason that ECC’s percentage fee on this task order was 

reduced from the initial 10% to the final 9.48%. 

Contract FA8903-06-D-8511, Task Order 13, Facilities for 4th Division 

AFCEE’s technical evaluation of the ECC proposal for modification 6 concluded that the request 

for $12.16 million was over the $8.2 million available. The evaluation noted that additional 

funding would be requested because reducing the suggested labor hours and waiving the fee 

would reduce the cost by only about $1.08 million. The increased funding was obtained, and 

modification 6 increased the task order ceiling to $12.16 million, including a $0.69 million fee. 

The preliminary price negotiation memorandum for modification 6 discusses the fee and notes 

that the increase is a cost to complete work (not a result of added work) but that “most of the 

factors leading to the cost increases were beyond the control of ECC and therefore it was 

determined that ECC was entitled to the full 6% fee that the contractor had proposed.” Again, 

fees were provided on costs that were not the result of added work. 

 

4

 Section 215.404-4 requires a contracting officer to use a structured approach for developing a prenegotiation profit 

or fee objective on most negotiated contract actions. One of the specified approaches is the weighted guidelines 

method, which focuses on four profit factors: performance risk, contract type risk, facilities capital employed, and 

cost efficiency. 
43

Contract FA8903-06-D-8511, Task Order 14, Facilities for 5th Division 

On task order 14 under the 2006 contract, modification 4 increased the ceiling amount by $13.11 

million to $42.67 million. The preliminary price negotiation memorandum includes acceptance 

of ECC’s proposed 6% fee but reduces the fee to 4.8% for costs without the DCAA rate 

adjustment. The memorandum notes that the increase is a cost to complete (as opposed to a 

work change request) but that most of the factors leading to the cost were beyond ECC’s control. 

However, AFCEE’s rating of ECC reported that the project had fallen behind schedule because 

of ECC management deficiencies. The technical evaluator indicated that 80% of the cost was the 

government’s fault because of delayed approval of plans and funding issues and that the 

remaining 20% was due to the subcontractor’s mismanagement and other items under ECC’s 

control. Therefore, the fee rate was reduced to 4.8% (apparently the adjusting rate for the 

portion under ECC’s control) for costs other than the DCAA rate adjustment. This is another 

example showing that AFCEE provided additional fees when work was not added and that some 

cost increases resulted from contractor mismanagement. 

Contract FA8903-04-D-8672, Task Order 32, Mosul/Tikrit Facilities 

The initial fee rate on the $18.41 million award for this task order was 8%, and the fee rate that 

ECC received on the final cost of $98.13 million was 7.95%. 

• On modification 8, AFCEE increased the fee over the amount proposed by ECC. ECC 

had proposed an 8% fixed fee of $0.82 million for this modification, but the AFCEE 

contracting officer awarded a fixed fee of $1.01 million, an increase of $0.19 million over 

the amount ECC proposed. AFCEE allowed this increase as a fee on a subcontractor’s 

cost increase, which ECC had not requested. The contracting officer included a fee on 

the cost increase because government delays and changes in sites were considered to be a 

major factor in the increase. 

• On modification 12 under this task order for $5.99 million, ECC received a fee of 8%, the 

same as the basic task order 8% fee; however, in the performance rating for this task 

order the project manager had reported that ECC’s $6 million cost to complete was partly 

due to failure to control subcontractors and cost escalation due to various delays. The 8% 

fee seems excessive based on this stated reason for the cost to complete. 

 
44

Conclusions and Recommendation 

Conclusions 

The ECC task orders resulted in construction of numerous facilities throughout Iraq for the 

ultimate use of Iraqi Security Forces. However, the cost and schedule for construction projects 

increased substantially. The two key causes for the increases were changes in the scopes and 

locations of work after the task orders were issued and the costs and delays caused by unstable 

security conditions. The changes in scope and location also resulted in wasted funds. As a result 

of work changes, security costs, and waste, the facilities built for the funds expended were less 

than desired and illustrate the issues inherent in reconstruction in a contingency environment. 

SIGIR notes that task order management and oversight were generally sound, but a few concerns 

were identified. For the ECC task orders, MNSTC-I and AFCEE made extensive efforts to 

provide needed management and oversight of the contractor’s performance and of the projects. 

However, a March 2008 investigation of a MNSTC-I official’s inappropriate 

involvement/relationship in the AFCEE procurement processes identified significant questions 

about procurement integrity that have not been addressed. Further, the fees awarded for 

modifications to the task orders appear excessive because the awarded fees were not limited to 

“added work” as specified in the contract; at a minimum, fees were awarded on cost increases 

caused by delays, security issues, or other unforeseen issues. For some modifications, fees were 

awarded for cost increases that resulted from ECC’s performance problems. AFCEE officials 

believe the contracting officers did their best to determine fair and reasonable fees. We did not 

pursue this further because the contracting officers had wide latitude in making business 

judgments and the fees on each modification were finalized in a negotiated agreement with ECC. 

Recommendation 

Previous SIGIR reports have included recommendations and/or lessons learned to address issues 

related to cost increases and schedule delays on Iraq reconstruction projects. The major issues 

we have identified in this report regarding the changes in work scope after the award of task 

orders and the unstable security conditions in Iraq have been addressed. Accordingly, SIGIR 

includes no recommendations or lessons learned in this report. 

The procurement integrity issues that MNSTC-I has identified but not pursued have been 

provided to SIGIR Investigations for consideration. 

 
45

Management Comments 

SIGIR provided a draft of this report to the responsible agencies for comment; however, SIGIR 

has no recommendations and the agencies are not required to comment. Neither MNSTC-I nor 

AFCEE provided comments. 

 
46

Appendix A—Scope and Methodology 

In November 2008, the Special Inspector General for Iraq Reconstruction (SIGIR) initiated 

Project 9002 to audit contracts awarded to the Environmental Chemical Corporation (ECC) for 

Iraq reconstruction projects. SIGIR’s objectives for this report were to examine contract 

outcomes, costs, and oversight, emphasizing issues related to vulnerabilities to fraud, waste, and 

abuse. This audit was performed under the authority of Public Law 108-106, as amended, which 

also incorporates the duties and responsibilities of inspectors general under the Inspector General 

Act of 1978. SIGIR conducted its work during December 2008 through September 2009 in 

various locations in the United States and in Baghdad, Iraq. 

To accomplish our audit objectives, we visited or held discussions with officials and/or reviewed 

data from the following organizations: 

• Environmental Chemical Corporation (ECC) 

• Air Force Center for Engineering and the Environment (AFCEE) 

• Multi-National Security Transition Command-Iraq (MNSTC-I) 

• Defense Contract Audit Agency (DCAA) 

• Defense Contract Management Agency 

We obtained and reviewed relevant contract, financial, and other information from these 

organizations relating to the pre-award, award, oversight, and performance of ECC’s Iraq 

reconstruction task orders under contracts FA8903-04-D-8672 and FA8903-06-D-8511. We 

reviewed the contracts, task orders, associated modifications, and other related documentation 

from the contract files maintained by AFCEE and ECC. We obtained limited data from 

MNSTC-I related to the justification for the scopes of work in the task orders and the changes in 

requirements that occurred after task order issuance. 

To determine the overall cost and funding of the contracts and individual task orders, we used 

data in the contract files and financial data obtained from the U.S Army Corps of Engineers’ 

Financial Management System. In addition, to determine the outcome and oversight of the 

selected task orders, we used data in the AFCEE and ECC contract and project files, including 

the basic contract, task orders, task order modifications, and scope of work changes; invoices 

that ECC submitted for work under the task orders; weekly and monthly progress reports on the 

work ECC performed; quality assurance and inspection reports prepared by AFCEE’s contractor 

Versar; contract fund status reports; and photographs of project sites before, during, and after 

reconstruction. In addition, we reviewed the government process to monitor ECC’s cost, 

progress, quality, and performance. We identified the number of buildings and facilities to be 

constructed under each task order and documentation related to the contractor’s delivery of these 

items. We also reviewed relevant documents related to transferring projects to the Government 

of Iraq. 

 
47

We also reviewed relevant portions of the Federal Acquisition Regulation, SIGIR prior reports 

relevant to the ECC contracts, and DCAA audits of ECC. We are aware of the Government 

Accountability Office’s (GAO) recent findings regarding DCAA audit quality including 

compromise of auditor independence, insufficient audit testing, and inadequate planning and 

supervision.5

 We are reporting factually on the information contained in DCAA reports that 

relate to our audit work; however, due to the nature of GAO’s findings we are not placing undue 

reliance on DCAA’s findings or lack thereof. 

The audit was conducted in accordance with generally accepted government auditing standards. 

Those standards require that SIGIR plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and conclusions based on our audit 

objectives. SIGIR believes that the evidence obtained provides a reasonable basis for our 

findings and conclusions based on our audit objectives.

Use of Computer-processed Data 

To perform this audit, SIGIR had direct access to data in the U.S Army Corps of Engineers’ 

Financial Management System and used this access to identify obligations, expenditures, and 

unliquidated obligations for the task orders. This automated financial management system is 

intended to provide timely, accurate, and comprehensive financial information for all levels of 

management, especially at the program and project management level, through interface with 

other information system programs. We used computer-processed data contained in this system 

to identify, verify, and crosscheck financial information on task orders contained in AFCEE’s 

and ECC’s contract files. This process showed that the computer-processed data we used was 

reliable. 

Internal Controls 

We did not examine ECC’s internal management and financial control systems. Rather, we 

relied on DCAA reviews of ECC’s invoices and accounting and purchasing systems and contract 

files to identify indications of fraud, waste, and abuse. Since the work was largely complete at 

the time of our audit, we could not monitor construction progress. Further, we were unable to 

observe the condition of the construction projects at the time of or after their completion. Thus, 

we relied on available reports, site photographs, transfer documents, and discussions with 

government and ECC officials for insight on the completed facilities. 

We did not review the U.S. government or AFCEE contract management system as a whole but 

did review controls and oversight of the specific task orders under the two AFCEE contracts. 

We reviewed the controls used in awarding, managing, and administering the ECC task orders. 

Specifically, we reviewed the management controls related to contract and task order award, task 

order oversight, oversight of facilities construction, and the turnover of completed facilities. 

 

5 DCAA Audits: Allegations That Certain Audits at Three Locations Did Not Meet Professional Standards Were 

Substantiated, GAO-08-857, 7/22/2008 and DCAA Audits: Widespread Problems with Audit Quality Require 

Significant Reform, GAO-09-468, 9/23/2009 
48

Prior Coverage 

The following reports are related to this assignment: 

Key Recurring Management Issues Identified in Audits of Iraq Reconstruction Efforts, SIGIR 08-

020, 7/27/2008. 

Aviation Base Building, Kirkuk, Iraq, SIGIR PA 06-040, 4/12/2006. 

New 2nd Brigade Base, Kirkuk, Iraq, SIGIR PA 06-041, 4/20/2006. 

Other Reports in the Series of Focused Contract Audits 

Developing a Depot Maintenance Capability at Taji Hampered by Numerous Problems, SIGIR09-027, 7/29/2009. 

Tikrit Location Command Project Achieving Contract Goals by Using Sound Management 

Practices, SIGIR 09-024, 7/29/2009. 

Commander’s Emergency Response Program: Hotel Construction Completed, But Project 

Management Issues Remain, SIGIR 09-026, 7/24/2009. 

Commander’s Emergency Response Program: Muhalla 312 Electrical Distribution Project 

Largely Successful, SIGIR 09-025, 7/24/2009. 

Security Forces Logistics Contract Experienced Certain Cost, Outcome, and Oversight 

Problems, SIGIR-09-014, 4/24/2009. 

Cost, Outcome, and Oversight of Iraq Oil Reconstruction Contract with Kellogg Brown & Root 

Services, Inc., SIGIR 09-008, 1/12/2009. 

Cost, Outcome, and Oversight of Local Governance Program Contracts with Research Triangle, 

SIGIR 09-003, 10/21/2008. 

Outcome, Cost, and Oversight of the Security and Justice Contract with Parsons Delaware, Inc.,

SIGIR 08-019, 7/28/2008. 

Outcome, Cost, and Oversight of Water Sector Reconstruction Contract with FlourAMEC, LLC, 

SIGIR 08-018, 7/15/2008. 

Outcome, Cost, and Oversight of Electricity-Sector Reconstruction Contract with Perini 

Corporation, SIGIR 08-011, 4/29/2008. 

Outcome, Cost, and Oversight of Iraq Reconstruction Contract W914NS-04-D-006 SIGIR 08-

010, 1/28/2008. 

Outcome, Cost, and Oversight of Reconstruction of Taji Military Base and Baghdad Recruiting 

Center, SIGIR 08-004, 1/15/2008. 
49

Interim Review of DynCorp International, LLC Spending Under Its Contract for the Iraqi Police 

Training Program, SIGIR 07-016, 10/23/2007. 

Review of Bechtel’s Spending Under Its Phase II Iraq Reconstruction Contract, SIGIR 07-009, 

7/24/2007. 
50

Appendix B—Financial Status of ECC Task Orders 

for Reconstruction Projects as of July 31, 2009 

Table 13—Financial Status of Task Orders under 2004 Contract ($ millions) 

Contract FA8903-04-D-8672 

Task 

Order Reconstruction Project Obligation Expenditure 

Unliquidated 

Obligation

03 Iraq Military Base at Kirkuk $74.85 $73.58 $1.27

06 Utilities at Kirkush Military Base 35.95 35.95 -

08 An Numaniyah Military Base, Phase I, Part B 57.41 57.41 -

11 Southern School Repair 29.18 29.17 0.01

16 Brigade Facility at Kirkuk 43.67 43.67 -

17 Al Kut Police Academy Facilities 26.12 25.83 0.29

18 Camp India Facilities at Fallujah 84.70 83.37 1.33

19 Repair/Replace Iraq Schools 6.90 6.81 0.09

20 Harman Al Alil Military Base 35.44 35.04 0.40

22 Renovate Base at Habbaniyah 63.48 63.48 -

23 Border Forts 8 and 9 3.81 3.76 0.05

24 Renovate Police Stations, Northern Region 2.96 2.92 0.04

27 Iraq Training Brigade at Kirkush 8.95 8.50 0.45

28 Renovate Facilities at Habbaniyah 55.15 54.53 0.62

32 Mosul/Tikrit Facilities 98.13 96.83 1.30

34 Northern Police Stations 13.93 12.60 1.33

35 Facilities at Kirkush 47.69 47.31 0.38

36 Facilities at Kirkuk 35.78 35.41 0.38

37 Facilities at Camp Majid 57.73 57.24 0.49

48 Facilities at Kirkuk 0.50 0.42 0.08

20 Task Orders $782.33 $773.83 $8.51

Note: Unliquidated obligations and totals may not add due to rounding. 

Source: U.S. Army Corps of Engineers Financial Management System data. 
51

Table 14—Financial Status of Task Orders under 2006 Contract ($ millions) 

Contract FA8903-06-D-8511 

Task 

Order Reconstruction Project Obligation Expenditure 

Unliquidated 

Obligation

10 Facilities at Ramadi $57.57 $56.05 $1.52

12 Northwest Police Stations 26.47 23.30 3.17

13 Facilities for 4th Division 39.31 38.72 0.58

14 5th Division, Light Infantry Battalion 42.56 41.54 1.02

15 Facilities for Iraq Forces, Camps Slayer and 

Victory at Baghdad 50.77 49.76 1.01

19 Iraq Air Force Flight Operations at Kirkuk 5.75 5.75 -

24 Commando Company at Al Asad 17.87 17.06 0.81

25 Diyala Police Stations 10.36 10.10 0.26

26 Facilities for Battalion Support, Gabe 14.86 13.96 0.90

27 Iraq Army Base Camp at Jelewea 

(Terminated) 0.29 0.29 -

32 Baqubah-Diyala Police Stations 8.71 7.41 1.30

33 Vehicle Maintenance Facility Babil 

(Terminated) - - -

34 Extra Large GSU Samara (Terminated) - - -

35 Extra Large GSU Al Qaim (Terminated) - - -

38 Housing at Akashaat 13.88 13.77 0.11

39 Housing at Qsar Amij 13.52 13.41 0.11

40 Iraq Air Force Facilities at Kirkuk 4.96 4.92 0.04

41 New Facilities and Modifications of Air 

Force Facilities at Kirkuk 30.46 29.86 0.60

18 Task Orders $337.34 $325.90 $11.43

Note: Unliquidated obligations and totals may not add due to rounding. 

Source: U.S. Army Corps of Engineers Financial Management System data. 

Table 15—Summary of Financial Status of Task Orders under 2004 and 

2006 Contracts ($ millions) 

Contract Obligation Expenditure

Unliquidated 

Obligation

FA8903-04-D-8672 (20 Task Orders) $782.33 $773.83 $8.51

FA8903-06-D-8511 (18 Task Orders) 337.34 325.90 11.43

Total $1,119.67 $1,099.73 $19.94

Source: Tables 13 and 14. 
52

Appendix C—Percentage of Task Order Obligations 

to Private Security Contractors 

Table 16— Percentage of Task Order Obligations to Private Security Contractors 

under 2004 Contract ($ millions) 

Contract FA8903-04-D-8672 

Task 

Order Reconstruction Project 

7/31/2009 

Obligation

Amount to 

Private 

Security 

Contractor 

% of 

Obligation 

for Security 

Contractor

03 Iraq Military Base at Kirkuk $74.85 $6.58 9%

06 Utilities at Kirkush Military Base 35.95 2.17 6%

08 An Numaniyah Military Base, Phase I, 

Part B 57.41 3.55 6%

11 Southern School Repair 29.18 2.11 7%

16 Brigade Facility at Kirkuk 43.67 5.01 11%

17 Al Kut Police Academy Facilities 26.12 2.62 10%

18 Camp India Facilities at Fallujah 84.70 11.64 14%

19 Repair/Replace Iraq Schools 6.90 0.53 8%

20 Harman Al Alil Military Base 35.44 7.16 20%

22 Renovate Base at Habbaniyah 63.48 8.78 14%

23 Border Forts 8 and 9 3.81 0.73 19%

24 Renovate Police Stations, Northern 

Region 2.96 0.10 3%

27 Iraq Training Brigade at Kirkush 8.95 2.40 27%

28 Renovate Facilities at Habbaniyah 55.15 9.90 18%

32 Mosul/Tikrit Facilities 98.13 17.40 18%

34 Northern Police Stations 13.93 2.14 15%

35 Facilities at Kirkush 47.69 8.31 17%

36 Facilities at Kirkuk 35.78 5.95 17%

37 Facilities at Camp Majid 57.73 2.45 4%

48 Facilities at Kirkuk 0.50 0.07 14%

 20 Task Orders $782.33 $99.60 13%

Source: U.S. Army Corps of Engineers Financial Management System obligation data and ECC data on private security 

contractor costs. 
53

Table 17—Percentage of Task Order Obligations to Private Security Contractors 

under 2006 Contract ($ millions) 

Contract FA8903-06-D-8511 

Task 

Order Reconstruction Project 

7/31/09 

Obligation

Amount to 

Private 

Security 

Contractor 

% of 

Obligation 

for Security 

Contractor

10 Facilities at Ramadi $57.57 $9.09 16%

12 Northwest Police Stations 26.47 8.92 34%

13 Facilities for 4th Division 39.31 9.12 23%

14 5th Division, Light Infantry Battalion 42.56 7.53 18%

15 Facilities for Iraq Forces, Camps Slayer 

and Victory at Baghdad 50.77 5.55 11%

19 Iraq AF Flight Operations at Kirkuk 5.75 1.42 25%

24 Commando Company at Al Asad 17.87 0.73 4%

25 Diyala Police Stations 10.36 1.40 14%

26 Facilities for Battalion Support, Gabe 14.86 2.41 16%

27 Iraq Army Base Camp at Jelewea 

(Terminated) 0.29 0.01 3%

32 Baqubah-Diyala Police Stations 8.71 0.87 10%

38 Housing at Akashaat 13.88 2.86 21%

39 Housing at Qsar Amij 13.52 3.19 24%

40 Iraq Air Force Facilities at Kirkuk 4.96 0.73 15%

41 New Facilities and Modifications of Air 

Force Facilities at Kirkuk 30.46 1.68 6%

15 Task Orders $337.34 $55.51 16%

Source: U.S. Army Corps of Engineers Financial Management System obligation data and ECC data on private security 

contractor costs. 

Table 18—Summary of Task Order Obligations to Private Security 

Contractors under 2004 and 2006 Contract ($ millions) 

Contract 

7/31/09 

Obligation

Amount to 

Private 

Security 

Contractor

% of 

Obligation 

for Security 

Contractor

FA8903-04-D-8672--20 Task Orders $782.33 $99.60 13%

FA8903-06-D-8511--15 Task Orders 337.34 55.51 16%

Total $1,119.67 $155.11 14%

Source: Tables 16 and 17. 
54

Appendix D—Acronyms 

Acronym Description 

ACO Administrative Contracting Officer 

AFCEE Air Force Center for Engineering and the Environment 

DCAA Defense Contract Audit Agency 

ECC Environmental Chemical Corporation 

GAO 

MNSTC-I 

Government Accountability Office 

Multi-National Security Transition Command-Iraq 

SIGIR Special Inspector General for Iraq Reconstruction 

 
55

Appendix E—Audit Team Members 

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

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

Reconstruction. 

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

Ziad Buhaissi 

David Childress 

Whitney Miller 

Richard McVay 

 
56

Appendix F—SIGIR Mission and Contact Information 

SIGIR’s Mission Regarding the U.S. reconstruction plans, programs, and 

operations in Iraq, the Special Inspector General for Iraq 

Reconstruction provides independent and objective: 

• oversight and review through comprehensive audits, 

inspections, and investigations 

• advice and recommendations on policies to promote 

economy, efficiency, and effectiveness 

• deterrence of malfeasance through the prevention and 

detection of fraud, waste, and abuse 

• information and analysis to the Secretary of State, the 

Secretary of Defense, the Congress, and the American 

people through Quarterly Reports 

Obtaining Copies of SIGIR 

Reports and Testimonies 

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

SIGIR’s Web site (www.sigir.mil). 

To Report Fraud, Waste, and 

Abuse in Iraq Relief and 

Reconstruction Programs 

Help prevent fraud, waste, and abuse by reporting 

suspicious or illegal activities to the SIGIR Hotline: 

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

• Phone: 703-602-4063 

• Toll Free: 866-301-2003 

Congressional Affairs Hillel Weinberg 

Assistant Inspector General for Congressional 

 Affairs 

Mail: Office of the Special Inspector General 

 for Iraq Reconstruction 

 400 Army Navy Drive 

 Arlington, VA 22202-4704 

Phone: 703-428-1059 

Email: hillel.weinberg@sigir.mil 

Public Affairs Danny Kopp 

Office of Public Affairs 

Mail: Office of the Special Inspector General 

 for Iraq Reconstruction 

 400 Army Navy Drive 

 Arlington, VA 22202-4704 

Phone: 703-428-1217 

Fax: 703-428-0818 

Email: PublicAffairs@sigir.mil