Stabilizing and Rebuilding Iraq: Actions Needed to Address Inadequate Accountability over U.S. Efforts and Investments
Published: 2008-03-11T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Since 2001, Congress has appropriated nearly $700 billion for the global war on terrorism. The majority of these funds have supported U.S. efforts in Iraq. Congressional oversight is crucial to improve performance, ensure accountability, and protect U.S. programs from fraud, waste, and abuse. Since 2003, GAO has issued nearly 130 Iraq-related reports and testimonies. This testimony addresses (1) factors contributing to poor contracting outcomes and accountability, (2) long-standing issues in the Department of Defense's (DOD) management and oversight of contractors supporting deployed forces, and (3) efforts to improve the capacity of the Iraqi government. GAO reviewed U.S. agency documents and interviewed officials from State, DOD, and other agencies; the United Nations (UN); and the Iraqi government. We also made multiple trips to Iraq.
section_title: What GAO Found
paragraphs: U.S. efforts in Iraq have relied extensively on contractors to undertake reconstruction projects and provide support to U.S. forces. However, a lack of well-defined requirements, poor business arrangements, and inadequate oversight and accountability have negatively affected reconstruction and support efforts. For example, in a July 2007 report, GAO found that DOD completed negotiation for task orders on an oil contract more than 6 months after the work commenced and most costs were incurred. DOD paid nearly all of the $221 million in costs questioned by auditors. Also in July 2007, GAO found that unclear DOD guidance, inadequate staff, and insufficient technology resulted in poor accountability over more than 190,000 weapons provided to Iraqi forces. DOD concurred with GAO's recommendation to determine what DOD accountability procedures apply or should apply to the program. However, as of March 2008, DOD had not made a determination. The need to effectively manage and oversee contractors supporting deployed forces is equally important. DOD pays billions of dollars each year for contracted goods and services in locations such as Iraq and elsewhere. However, several long-standing and systemic problems continue to hinder DOD's management and oversight of contractors at deployed locations, including the failure to follow planning guidance, provide an adequate number of contract oversight personnel, systematically collect and distribute lessons learned, and provide predeployment training for military commanders and contract oversight personnel on the use and role of contractors. GAO's work has identified instances where poor oversight and management of contractors led to negative financial and operational impacts.
section_title: What GAO Recommends
paragraphs: GAO has made a number of recommendations aimed at strengthening DOD's management and oversight of contractor support at deployed locations, and the department has agreed to implement many of those recommendations. However, GAO has found that DOD has made limited progress in implementing some key recommendations. The United States has made available nearly $6 billion to rebuild Iraq's energy sector and $300 million to develop its government ministries but lacks integrated strategic plans for both efforts. Building the capacity of the ministries is critical to ensure that Iraq can effectively govern, rebuild, and stabilize the country. Rebuilding Iraq's energy sector is necessary to ensure that Iraq can pay for these tasks and provide essential services to the Iraqi people. However, in the absence of a comprehensive and integrated strategic plan, U.S. efforts to build the capacity of the Iraqi government have been hindered by multiple U.S. agencies pursuing individual efforts without overarching direction. The creation of a plan for the energy sector is also essential for Iraq to meet energy production and export goals. GAO recommended that State work with Iraqi ministries to develop an integrated energy plan. State commented that the Iraqi government, not the U.S. government, should act on GAO's recommendations. Given the billions of dollars provided to rebuild Iraq's energy sector and the limited capacity of Iraqi ministries, GAO believes that its recommendations are still valid.

section_title: Letter
paragraphs: I am pleased to be here today to discuss the challenges the United States  must address to successfully improve performance and ensure  accountability over U.S. efforts to stabilize and reconstruct Iraq. In my  statement today, I will discuss (1) factors contributing to poor contracting  outcomes and accountability, (2) long-standing issues in the Department  of Defense’s (DOD) management and oversight of contractors supporting  deployed forces, and (3) efforts to improve the capacity of the Iraqi  government.
Between fiscal years 2001 to 2008, Congress appropriated nearly $700  billion for the global war on terrorism. The majority of this amount has  been provided to DOD for military operations in support of Operation Iraqi  Freedom, including the cost of equipping, maintaining, and supporting our  deployed forces. About $45 billion was provided for reconstruction efforts,  including rebuilding Iraq’s oil and electricity sectors, improving its security  forces, and enhancing Iraq’s capacity to govern. Prudence with taxpayer  funds and growing long-range fiscal challenges demand that the United  States maximize its return on the billions of dollars invested in Iraq.   Further, strengthening Iraq’s fragile government institutions, which have  thus far failed to adequately deter corruption, stimulate employment, or  deliver essential services, is critical to establishing a peaceful, stable, and  secure Iraq.
My statement today is based upon GAO’s extensive work spanning several  years. Since 2003, we have issued nearly 130 Iraq-related reports and  testimonies. Our work in Iraq largely has been performed under my  authority as Comptroller General to conduct evaluations on my own  initiative since it is a matter of broad interest to the entire Congress. We  performed this work in accordance with generally accepted government  auditing standards.
I am pleased to appear with the DOD Inspector General and the Special  Inspector General for Iraq Reconstruction. As you know, GAO and the  inspectors general have different, but complementary, roles and  responsibilities. GAO’s broad audit authority allows it to support Congress  through strategic analyses of issues that cut across multiple federal  agencies and sources of funding, while the inspectors general focus  primarily on preventing and exposing fraud, waste, and abuse in individual  federal agency programs. The abilities of the inspectors general to provide  in-country oversight of specific projects and reconstruction challenges  have enabled GAO to focus on national, sector, and interagency issues. We  and the other accountability organizations coordinate our oversight efforts  to avoid duplication and leverage our resources.
I would like to note that several of my colleagues in the accountability  community and I have developed a definition of waste. As we see it, waste  occurs when taxpayers do not receive reasonable value for their money in  connection with any government-funded activity due to inappropriate acts  or omissions by officials with control over or access to government  resources. Most waste does not involve a violation of law, but it does  involve mismanagement resulting from poor leadership or guidance;  inappropriate actions or omissions, including the use of poor business  arrangements; or inadequate oversight, often caused by having too-few  skilled people. Our reports and testimonies have provided specific  examples where such issues resulted in higher costs, schedule delays, and  unmet goals. I highlight some of these in my testimony. Nevertheless,  estimating or quantifying the financial impact of fraudulent, wasteful, or  abusive practices is not always feasible or practicable. However, the  inability to do so should not detract from the need to improve  management and accountability over our efforts in Iraq.
subsections: section_title: Background
paragraphs: Several entities and U.S. agencies have played important roles in U.S.  efforts to rebuild and stabilize Iraq. From May 2003 through June 2004, the  Coalition Provisional Authority (CPA) was responsible for overseeing,  directing, and coordinating rebuilding efforts. After its dissolution, the  Secretary of State assumed responsibilities for the supervision and general  direction of reconstruction efforts in Iraq. DOD, including the U.S. Army  Corps of Engineers, and United States Agency for International  Development (USAID) have had responsibility for managing and  overseeing specific reconstruction projects.
Contractors have largely carried out reconstruction efforts in Iraq. For  example, in early 2004, the CPA, through various military organizations,  awarded seven contracts to help provide overall direction, coordination,  and oversight of 12 large design-build contractors. In turn, these 12 design- build contractors were responsible for the design and execution of  construction activities in various sectors such as electricity, oil, and public  works and water.
In addition, DOD has made extensive use of contractors to support its  deployed forces.  The scale of contractor support DOD relies on today in  locations such Iraq and elsewhere amounts to billions of dollars worth of  goods and services each year, underscoring the need to effectively manage  and oversee contractor efforts.  Contractors provide interpretation,  intelligence analysis, and security services, as well as weapon systems  maintenance and base operations support. The significance of such  contracts is illustrated by the fact that the Army reported obligations of  over $4.5 billion in fiscal year 2007 on its single-largest support contract,  the Logistics Civil Augmentation Program (LOGCAP).
The collective effort of military, civilian, and contractor personnel in Iraq  has been complicated by the country’s security environment. The CPA’s  original reconstruction plan was premised on the assumption that a  permissive security environment would enable the United States to restore  Iraq’s essential services to prewar levels. The CPA also assumed that the  Iraqi government and the international community would help finance  Iraq’s development and that Iraqi oil revenues could help pay for  reconstruction costs. None of these assumptions has materialized.
In February 2007, we reported that the security situation was continuing to  deteriorate, impeding the management and execution of reconstruction  efforts. As shown in figure 1, the security situation generally deteriorated  through the summer of 2007, with the number of attacks increasing to  about 180 per day in June 2007.
However, since then, the number of enemy-initiated attacks has decreased  by about two-thirds, to the levels of early 2005. Specifically, the average  number of daily attacks decreased from about 180 in June 2007 to about 60  in January 2008—a nearly 70 percent decrease—as the number of attacks  against coalition forces in particular fell considerably. The number of  attacks on Iraqi security forces and civilians also declined from June 2007  levels. While security has improved in Iraq, a permissive security  environment has yet to be achieved.
section_title: Poor Contracting Outcomes and Accountability Hinder U.S. Efforts in Iraq
paragraphs: Our work over the past 5 years has shown that one or more of the  elements essential for achieving good acquisition outcomes—well-defined  requirements matched with adequate resources, sound business  arrangements, and the capacity to properly manage and oversee  contractor performance—were often missing during specific  reconstruction efforts, in contracts to support deployed forces, and in our  efforts to equip Iraqi security forces. The absence of these elements often  contributed to unmet expectations, schedule delays, or higher-than- necessary costs, underscoring both the need to hold agencies and  contractors accountable for outcomes, and the challenges of doing so.  Such issues are not unique to Iraq but reflect some of the long-standing  and systemic issues confronting DOD. They are, however, magnified in a  contingency situation such as Iraq or Katrina. Further, we found that  unclear DOD guidance resulted in poor accountability over 190,000  weapons provided to the Iraqi security forces.
subsections: section_title: Mismatch between Requirements and Resources
paragraphs: A prerequisite to good outcomes is a match between well-defined  requirements and available resources. Shifts in overall priorities and  funding, even those made for good reasons, invariably have a cascading  effect on individual contracts, making it more difficult to manage  individual projects to successful outcomes and complicating efforts to  hold agencies and contractors accountable. After the State Department  assumed responsibility for U.S. reconstruction efforts in 2004, it re- examined the priorities and programs initiated by the CPA, with the  objective of reprioritizing funding to key, high-impact projects. State  increased support for security, law enforcement efforts, and oil  infrastructure enhancements. These reallocations, affecting billions of  dollars of planned work, led to the cancellation of some projects in the  electricity and water sector.
At the contract level, the lack of well-defined requirements resulted in  schedule delays and the United States potentially paying more than  necessary. For example, in September 2005, we reported that difficulties in  defining the cost, schedule, and work to be performed on projects in Iraq’s  water and sanitation sector contributed to project delays and reduced  scopes of work. We found that agreement between the U.S. government  and contractors on the final cost, schedule, and scope of 18 of the 24 task  orders valued at $873 million had been delayed. These delays occurred, in  part, because Iraqi authorities, U.S. agencies, and contractors could not  agree on scopes of work and construction details.
Previously, in July 2004, we reported that a disagreement between the  LOGCAP contractor and the DCAA on how to bill for services to feed  soldiers in Iraq involved at least $88 million in questioned costs. The  disagreement regarded whether the government should be billed on the  camp populations specified in the statement of work or on the actual head  count. A clearer statement of work, coupled with better DOD oversight of  the contract, could have prevented the disagreement and mitigated the  government’s risk of paying for more services than needed.
section_title: Business Arrangements that Increased Risk
paragraphs: To award contracts and begin reconstruction efforts quickly, DOD used  business arrangements that often increased DOD’s risk of paying higher  costs than it might have otherwise. Such arrangements often allowed  contractors to begin work before key contract terms and conditions, such  as the scope of the work and its price, were fully defined. For example, in  a September 2006 report, we found that DOD contracting officials were  less likely to remove the costs questioned by auditors if the contractor had  already incurred these costs before the contract action was definitized. In  contrast, in the few instances in which the government negotiated the  terms before starting work, the portion of questioned costs removed from  the proposal was substantial. For example, in three audits related to a  logistics support contract, DCAA questioned $204 million. Since the  government and the contractor negotiated the terms prior to the onset of  the work, the contractor had not incurred any costs at the time of  negotiations. DCAA calculated that $120 million of the $204 million in  questioned costs were removed as a result of its findings.
We subsequently issued a report in July 2007 that focused on the U.S.  Army Corps of Engineers’ $2.5 billion contract to Kellogg Brown & Root to  restore Iraq’s oil infrastructure and ensure an adequate fuel supply within  Iraq. DCAA reviewed the contract’s 10 task orders and questioned $221  million in contractor costs. While DOD considered DCAA’s audit findings  and performed additional analysis, the lack of timely negotiations  contributed significantly to DOD’s decision on how to address the  questioned costs. In this case, all 10 task orders were negotiated more than  180 days after the work commenced and the contractor had incurred  almost all its costs at the time of negotiations. These circumstances  influenced DOD’s decision to pay nearly all of the $221 million in  questioned costs.
section_title: Poor Management and Oversight of Contractor Performance
paragraphs: Managing contractors in an unstable contracting environment means  greater attention to oversight, which relies on having a capable  government workforce. Having personnel who are trained to conduct  oversight and who are held accountable for their responsibilities is  essential for effective oversight of contractors. If oversight is not  conducted, not sufficient, or not well documented, DOD is at risk of being  unable to identify and correct poor contractor performance. On multiple  occasions, we and others have reported on deficiencies in DOD’s  oversight; for example:  In December 2006, we reported that DOD did not have sufficient numbers  of contractor oversight personnel at deployed locations, which limited its  ability to obtain reasonable assurance that contractors were meeting  contract requirements efficiently and effectively.
In October 2007, the report of the Commission on Army Acquisition and  Program Management in Expeditionary Operations stated that the Army  lacked the leadership and military and civilian personnel to provide  sufficient contracting support to either expeditionary or peacetime  missions. According to the Commission, Army contracting personnel  experienced a 600-percent increase in their workload and were performing  more complex tasks, while the number of Army civilians and military in  the contracting workforce had remained stagnant or declined. As a result,  the Commission found that the vital task of postaward contract  management was rarely being done. It recommended that the Army  increase the number of civilian and military personnel in its contracting  workforce by 1,400 individuals.
Our recent analysis of five types of vehicles presented to the Army as  ready for acceptance from July 2006 through May 2007 found that 18 to 31  percent of the vehicles failed government inspection. Some equipment  presented to the Army failed inspection multiple times, sometimes for the  same deficiency. Rework on equipment that failed inspections since May  2005 wasted $4.2 million.
Such issues are not unique to Iraq but often reflect the long-standing and  systemic issues DOD faces. Since 1992, we have identified DOD contract  management to be high risk due to its vulnerabilities to fraud, waste,  abuse, and mismanagement. In a report issued in July 2006, we concluded  that, because awards to contractors were large and growing, DOD would  continue to be vulnerable to contracting fraud, waste or misuse of  taxpayer dollars, and abuse.
section_title: Insufficient Accountability over U.S.-Funded Equipment Provided to Iraqi Security Forces
paragraphs: In July 2007, we reported that DOD could not fully account for Iraqi  security forces’ receipt of U.S.-provided equipment. Three factors  contributed to this lapse in accountability. First, DOD had not specified  which DOD equipment accountability procedures, if any, applied to the  train-and-equip program for Iraq. Congress funded the train-and-equip  program for Iraq outside traditional security assistance programs, which,  according to DOD officials, allowed DOD a large degree of flexibility in  managing the program. These officials stated that, since the funding did  not go through traditional security assistance programs, the DOD  accountability requirements normally applicable to these programs did not  apply. For example, under traditional security assistance programs, DOD  regulations specify accountability procedures for storing, protecting,  transporting, and registering small arms and other sensitive items  transferred to foreign governments.
Second, DOD did not maintain a centralized record of all equipment  distributed to the Iraqi security forces from June 2004 until December  2005. At that time, DOD established a consolidated property book system  to track the issuance of equipment to the Iraqi security forces and was  attempting to recover past records. Our analysis found a discrepancy of at  least 190,000 weapons between data reported by the former Multinational  Security Transition Command- Iraq (MNSTC-I) commander and the  property books (see figure 2). Former DOD officials stated that this lapse  was due to an insufficient number of staff and the lack of a fully  operational network to distribute equipment, among other reasons.
Third, since the beginning of the program, DOD has not consistently  collected supporting documents that confirm when the equipment was  received, the quantities of equipment delivered, or the Iraqi units receiving  the equipment. Since June 2006, the command has placed greater  emphasis on collecting this documentation. However, our review of the  2007 property books found continuing problems with missing and  incomplete records. Further, the property books consist of extensive  electronic spreadsheets, which are an inefficient data management tool  given the large amount of data and limited personnel available to maintain  the system.
In our July 2007 report, we recommended that the Secretary of Defense (1)  determine which DOD accountability procedures apply or should apply to  the program, and (2) after defining the required accountability procedures,  ensure that sufficient staff, functioning distribution networks, standard  operating procedures, and proper technology are available to meet the  new requirements. DOD concurred with our recommendations but, as of  March 3, 2008, had not determined which accountability procedures apply  to the program.
section_title: Long-standing Problems Hinder DOD’s Management and Oversight of Contractors Supporting Deployed Forces
paragraphs: Several long-standing and systemic problems continue to hinder DOD’s  management and oversight of contractors at deployed locations, including  the failure to follow planning guidance, an inadequate number of military  and civilian contract oversight personnel, failure to systematically collect  and distribute lessons learned, and the lack of comprehensive training for  military commanders and contract oversight personnel. The recurring  nature of these issues underscores the need for DOD leadership to ensure  implementation of and compliance with existing guidance within the  department. In prior reports, we made a number of recommendations  aimed at strengthening DOD’s management and oversight of contractor  support at deployed locations, and the department has agreed to  implement many of those recommendations.  However, our prior work has  found that DOD has made limited progress implementing some key  recommendations.  Our work on contracts to support deployed forces in  Iraq has identified instances where poor oversight and management of  contractors led to negative financial and operational impacts.
subsections: section_title: DOD Has Not Followed Long-standing Planning Guidance Regarding the Use of Contractors to Support Deployed Forces
paragraphs: Our work has shown that DOD has not followed long-standing planning  guidance, particularly by not adequately factoring the use and role of  contractors into its planning. For example, DOD guidance stresses the  importance of fully integrating into logistics plans and orders the logistics  functions performed by contractors along with those performed by  military and government personnel. However, we noted in our 2003 report  that the operations plan for the war in Iraq contained limited information  on contractor support. Similarly, DOD policy requires planning for  contractor-provided services during crisis situations to provide a  reasonable assurance of the continuation of services and to prepare a  contingency plan for obtaining services from alternate sources if needed.  Our review found that essential contractor services for deployed troops  had not been identified and backup planning was not being done. Without  firm plans, there is no assurance that the personnel needed to provide  essential services will be available when needed.
In addition, we reported in 2004 that the Army did not follow its planning  guidance when deciding to use the Army’s LOGCAP contract. Army  guidance stresses the need for the clear identification of requirements and  the development of a comprehensive statement of work early in the  contingency planning process. Because this Army guidance was not  followed, the plan to support the troops in Iraq was not comprehensive  and was revised seven times in less than 1 year, generating a significant  amount of rework that would have been avoided had the planning  guidance been followed.
We have also found that DOD has not reviewed contractor support to  identify the essential services provided and the department lacked  visibility over the totality of contractor support to deployed forces. This  information is essential in incorporating contractor support into planning  efforts. For example, senior military commanders in Iraq stated that, when  they began to develop a base consolidation plan for Iraq, they had no  source to draw upon to determine how many contractors were on each  installation.
DOD has taken some actions to address this challenge. For example, DOD  is developing a database of contractors who deploy with U.S. forces.  According to senior DOD officials familiar with the database, as of  February 2008, the database had about 80,000 records. DOD is working  with State to include new DOD contractors, including private security  contractors, in the database. This effort responds to recommendations we  made in 2003 and 2006 to enhance the department’s visibility over  contractors in locations such as Iraq and Afghanistan. In addition, Joint  Contracting Command Iraq/Afghanistan has created the Theater Business  Clearance process that reviews and approves all contracts for work in Iraq  or Afghanistan. Joint Contracting Command Iraq/Afghanistan officials  stated that this has helped military commanders know ahead of time when  contractors are coming to work on their bases and to ensure sufficient  facilities are available for them.  According to senior DOD officials, DOD is  also developing a cadre of contracting planners to ensure that contractor  support is included in combatant commanders’ planning.
section_title: DOD Lacks Adequate Numbers of Trained Contract Oversight Personnel
paragraphs: Having the right people with the right skills to oversee contractor  performance is crucial to ensuring that DOD receives the best value for the  billions of dollars spent each year on contractor-provided services to  support deployed forces. However, several reviews by GAO and other  organizations have consistently found deficiencies in DOD’s oversight of  contractors due to an inadequate number of trained military and civilian  personnel to carry out these duties.
Such concerns are not new, and we continue to find that poor oversight  contributes to poor outcomes and wasted resources. For example, we  reported in 2004 that DOD did not always have enough contract oversight  personnel in place to manage and oversee its logistics support contracts  such as LOGCAP and the Air Force Contract Augmentation Program  (AFCAP). As a result, the Defense Contract Management Agency (DCMA)  was unable to account for $2 million worth of tools that had been  purchased using the AFCAP contract. In 2006, a LOGCAP Program Office  official stated that the office did not prepare to hire additional contract  oversight personnel in anticipation of an increased use of LOGCAP  services due to Operation Iraqi Freedom. According to the official, if  adequate staffing had been in place early, the Army could have realized  substantial savings through more effective reviews of the increasing  volume of LOGCAP requirements.
In January 2008, we reported that the Army was inadequately staffed to  conduct oversight of an equipment maintenance contract in Kuwait, a  contract with cumulative obligations of more than $500 million. Vacant  oversight personnel positions included a quality assurance specialist, a  property administrator, and two quality assurance inspectors. According  to Army officials, such shortfalls meant that surveillance was not being  performed sufficiently, and the Army was less able to identify trends in  contractor performance and begin corrective action. For example, a  review of property accountability reports found that the contractor  reported a total of $2.4 million in government-furnished property;  however, two of the eight property listings alone totaled more than $2  million. Without adequate oversight of government property, the Army  cannot be certain that duplicate supplies have not been ordered and that  government property is not misplaced or misused.
DOD has taken some actions to address the challenge of a less-than- adequate number of contract oversight personnel. For example, in  February 2007, the Deputy Assistant Secretary of the Army (Policy and  Procurement) issued guidance that required, among other actions,  contracting officers to ensure that a quality assurance surveillance plan be  prepared and implemented for service contracts exceeding $2,500. Joint  Contracting Command Iraq/Afghanistan officials stated that they are in the  process of adding about 39 personnel to provide additional contractor  oversight. Similarly, DCMA has deployed 100 more personnel and plans to  deploy another 150 to provide contract oversight and administration to  both ongoing and future contracts in Iraq. DCMA is providing oversight for  DOD’s private security contracts and other theater-wide contracts.  Additionally, senior DOD officials stated that the department has created a  task force to address the recommendations of the October 2007 report by  the Commission on Army Acquisition and Program Management in  Expeditionary Operations.
section_title: DOD Does Not Systematically Collect and Distribute Lessons Learned
paragraphs: DOD does not systematically ensure that lessons learned regarding the use  of contractors to support deployed forces are shared with military  personnel at deployed locations. Although DOD has a policy requiring the  collection and distribution of lessons learned to the maximum extent  possible, we found in our previous work that, with regard to contractor  support to deployed forces, no procedures were in place to ensure lessons  learned were being collected and distributed. For example, the Army  regulation that establishes policies, responsibilities, and procedures for  the implementation of the LOGCAP program makes customers that  receive services under the LOGCAP contract responsible for collecting  lessons learned. However, we have repeatedly found that DOD is not  systematically collecting and sharing lessons learned on the use of  contractors to support the deployed forces. We have made several  recommendations in the past that DOD implement a department-wide  lessons learned program for contractor support to deployed forces.   However, we have previously reported that DOD has not established any  procedures to systematically do this.  We also found a failure to share best  practices and lessons learned between units as one redeploys and the  other deploys to replace it. As a result, new units essentially start at  ground zero, having to resolve a number of difficulties until they  understand contractor roles and responsibilities.
section_title: DOD Does Not Adequately Train Military Commanders and Contract Oversight Personnel
paragraphs: DOD does not routinely incorporate information about contractor support  for deployed forces in its predeployment training of military personnel,  despite the long-standing recognition of the need to provide such  information. Our work has shown the need for better predeployment  training of military commanders since the mid-1990s. DOD policy states  that personnel should receive timely and effective training to ensure they  have the knowledge and tools necessary to accomplish their missions.
We have made several recommendations that DOD improve its contractor  support-related training.  In each instance, DOD concurred with our  recommendation.  However, our previous work has found limited evidence  that improvements have been made in terms of how DOD trains military  commanders and contract oversight personnel on the use of contractors to  support forces prior to deployment.  We have found that limited or no  predeployment training on the use of contractor support has caused a  variety of problems for military commanders in deployed locations.
As we reported in 2006, several military commanders with limited or no  predeployment training stated that they were not able to adequately plan  for the use of those contractors. According to the commanders, their  predeployment training provided them with insufficient information on  how much support contractors would be providing in Iraq. The  commanders were therefore surprised by the substantial number of  personnel they had to use to perform missions such as on-base escorts for  third-country and host-country nationals, convoy security, and other force  protection support to contractors.
We have found instances in which limited or no predeployment training  for military commanders on the use of contractor support to deployed  forces resulted in confusion about their roles and responsibilities in  managing contractors. In some cases, concerns rose over the potential for  military commanders to direct contractors to perform work outside the  scope of the contract, which they lack the authority to do. As Army  guidance makes clear, this can result in modifications to the contract that  would involve additional costs and, in some cases, be in violation of  competition requirements. For example, in 2006, a contractor stated that  he was instructed by a military commander to release equipment the  contractor was maintaining even though this action was not within the  scope of the contract. The issue ultimately had to be resolved by the  contracting officer.
In a 2005 report on the use of private security contractors in Iraq, we  found that commanders received no training or guidance on how to work  with private security providers in Iraq. To highlight the lack of training and  guidance, representatives from one unit stated they did not know private  security providers were in their battle space until the providers called for  assistance.
We also found that contract oversight personnel such as contracting  officers’ representatives continue to receive limited or no predeployment  training regarding their roles and responsibilities in monitoring contractor  performance. Contracting officers’ representatives are typically drawn  from units receiving contractor-provided services and are not normally  contracting specialists. However, DOD’s acquisition regulations require  that contracting officer’s representatives be qualified through training and  experience commensurate with their delegated responsibilities.
We have found that limited or no predeployment training of contract  oversight personnel has caused a variety of problems in deployed  locations.
The lack of training can affect the quality of service that contractors are  providing at deployed locations. In a December 2006 report, officials from  a corps support group in Iraq stated that, until they were able to get a  properly trained contracting officer’s representative in place, they  experienced numerous problems regarding the quality of food service  LOGCAP provided.
The lack of sufficient training also can lead to the inefficient use of  military personnel. In the 2006 report, officials with a Stryker brigade  stated that a lack of training hindered their ability to resolve staffing issues  with a contractor conducting background screenings of third-country and  host-country nationals. In this case, shortages of contractor-provided  screeners forced the brigade to use its own intelligence personnel to  conduct screenings. As a result, those personnel were not available for  their primary intelligence-gathering responsibilities.
DOD and its components have made some improvements in providing  training to military commanders and contract oversight personnel on the  use of contractors to support deployed forces prior to their deployment. In  DOD’s response to our 2006 report, the Director of Defense Procurement  and Acquisition Policy stated that the Army is making changes to its  logistics training programs that would incorporate contracting officers’  representatives training into its basic and advanced training for its  ordnance, transportation, and quartermaster corps.
In addition, the Defense Acquisition University has updated its  contingency contracting course to include a lesson on contractors  accompanying the force. DCMA is adding personnel to assist in the  training and managing of contracting officers’ representatives. However,  training of military commanders and contract oversight personnel remains  a challenge. For example, the 2007 report of the Commission on Army  Acquisition and Program Management in Expeditionary Operations found  that combatant commands do not recognize the significance of contracts  and contractors in expeditionary operations. The report concluded that  the Army needs to educate and train commanders on the important  operational role of contracting.
section_title: Lack of Adequate Strategic Planning Impedes U.S. Efforts to Develop Capacity in Iraqi Ministries and Improve Outcomes in Iraq’s Energy Sector
paragraphs: U.S. efforts to increase the Iraqi government’s capacity to invest in its own  rebuilding are undermined by strategic planning shortfalls in two critical  areas—developing the capacity of the Iraqi ministries to effectively  execute their responsibilities and integrating oil and electricity  development into a unified plan. In the energy sector, developing a  comprehensive and integrated strategic plan is essential to meeting energy  production and export goals, which in turn will help Iraq meet its future  financial needs. In both cases, U.S. assistance in developing these plans  will help ensure that future U.S. expenditures in rebuilding Iraq will result  in long-term benefits.
subsections: section_title: Department of State Has Not Developed a Comprehensive and Integrated Strategy to Develop Transparent and Accountable Iraqi Ministries
paragraphs: U.S. efforts to strengthen Iraqi ministries lack a strategic plan to integrate  efforts, address challenges within the ministries, and set clear priorities.   Over the past 4 years, U.S. efforts to help build the capacity of the Iraqi  national government have been characterized by multiple U.S. agencies  leading individual efforts, without overarching direction from a lead entity  that integrates their efforts, and shifting time frames and priorities in  response to deteriorating security and the reorganization of the U.S.  mission in Iraq. Consequently, U.S. efforts to date have not resulted in key  Iraqi ministries having the capacity to effectively govern and assume  increasing responsibility for operating, maintaining, and further investing  in reconstruction projects.
The Iraqi ministries also face several challenges that pose a risk to their  success and long-term sustainability. First, our October 2007 report found  that Iraqi ministries lack personnel with key skills, such as budgeting and  procurement. Second, sectarian influence over ministry leadership and  staff complicated efforts to build a professional and nonaligned civil  service. Third, pervasive corruption in the Iraqi ministries impeded the  effectiveness of U.S. efforts. Fourth, poor security limited U.S. advisors’  access to their Iraqi counterparts, preventing ministry staff from attending  planned training sessions and contributing to the exodus of skilled  professionals to other countries.
While recognizing these challenges, U.S. efforts to help build the capacity  of the Iraqi ministry suffered from the lack of coordination and shifting  priorities. First, no single agency was in charge of leading U.S. ministry  capacity development efforts. State, DOD, and USAID have led separate  efforts at Iraqi ministries, investing about $169 million in funds in 2005 and  2006 for these efforts. As of mid-2007, State and USAID were providing 169  capacity development advisors to 10 key civilian ministries; DOD was  providing 215 to the Ministries of Defense and Interior. Although State  took steps to improve coordination in early 2007, coordination between  the agencies remains problematic. For example, although State, USAID,  and DOD tried to develop a common set of metrics to measure ministry  capacity in 2005, the agencies have now developed separate sets of  metrics.
Second, the focus of U.S. capacity development efforts had shifted from  long-term institution-building projects, such as helping the Iraqi  government develop its own capacity development strategy, to an  immediate effort to help Iraqi ministries overcome their inability to spend  their capital budgets and deliver essential services to the Iraqi people.  However, as we reported in January 2008, it is unclear if Iraq is spending  its $10.1 billion capital budget since U.S. and Iraqi reports show widely  disparate rates for Iraqi government spending in 2007. Citing unofficial  Ministry of Finance data, the administration’s September 2007 Benchmark  Assessment Report stated that the Iraqi ministries had spent 24 percent of  their capital projects budgets, as of July 15, 2007. The report concluded  that, compared with 2006, the government of Iraq was becoming more  effective in spending its capital projects budget. However, the  administration’s report is not consistent with Iraq’s official expenditure  reports, which show that the central ministries had spent only 4.4 percent  of their investment budget, as of August 2007. The lack of consistent and  timely expenditure data limits transparency over Iraq’s execution of $10.1  billion 2007 budget for capital projects and reconstruction. The most  recent expenditure data show a capital expenditure rate of 7 percent for  the central ministries, as of November 2007.
The U.S. government is beginning to develop a comprehensive and  integrated strategy for U.S. capacity development efforts in Iraq, although  agencies have been implementing separate programs since 2003. GAO’s  previous analyses of U.S. multiagency national strategies demonstrate that  such a strategy should integrate the efforts of the involved agencies with  the priorities of the Iraqi government, and include a clear purpose and  scope; a delineation of U.S. roles, responsibilities, and coordination with  other donors, including the United Nations; desired goals and objectives;  performance measures; and a description of benefits and costs. U.S.  efforts to develop Iraqi ministry capacity have included some but not all of  these components. For example, agencies are working to clarify roles and  responsibilities. However, U.S. efforts lack clear ties to Iraqi-identified  priorities at all ministries and information on how resources will be  targeted to achieve the desired end-state.
In October 2007, we recommended that State, in consultation with the  Iraqi government, complete a comprehensive and integrated strategy for  U.S. capacity development efforts. State recognized the value of an  integrated strategy but stated that it may hinder efforts to tailor capacity  development efforts to the priorities of each ministry. GAO’s  recommendation does not preclude tailoring capacity development efforts  to meet each ministry’s unique needs. A strategy ensures that a U.S.- funded program has consistent overall goals, clear leadership and roles,  and risks that are assessed.
Similarly, in January 2008, we recommended that to help ensure more  accurate reporting of the government of Iraq’s spending of its capital  projects budget, the Secretary of the Treasury work with the government  of Iraq to ensure the reporting of accurate and reliable expenditure data.  The Department of the Treasury agreed with our recommendation to  ensure accurate and reliable reporting of Iraqi expenditure data and is  working to implement it.
section_title: Lack of Adequate Strategic Planning Impedes U.S. and Iraqi Efforts to Restore Iraq’s Energy Sectors
paragraphs: Despite the United States’ investment of about $6 billion to rebuild Iraq’s  oil and electricity sectors, production in both sectors has consistently  fallen below U.S. program goals of 3 million barrels per day and 6,000  megawatts of electrical peak generation capacity. As we reported in May  2007, it is difficult to identify the most pressing future funding needs, key  rebuilding priorities, and existing vulnerabilities and risks within the  sectors given the absence of an overarching strategic plan that  comprehensively assesses the requirements of the energy sector as a  whole. While the Iraqi government has crafted a multiyear strategic plan  for Iraq’s electricity sector, no such plan exists for the oil sector. Given the  highly interdependent nature of the oil and electricity sectors, such a plan  would help identify the most pressing needs for the entire energy sector  and help overcome the daunting challenges affecting future development  prospects.
As shown in figure 3, Iraq’s oil production and exports, despite recent  improvements, continue to fall below U.S. goals. As of December 2007,  Iraq produced about 2.5 million barrels of oil per day and exported nearly  2.0 million barrels per day, compared with the U.S. goals of 3.0 million  barrels and 2.2 million barrels, respectively.
In addition, U.S. goals for electricity remain unmet. The problem is  compounded by increasing demand that outstrips supply. As of February  2008, demand for electricity was twice as high as the supply. In addition,  available power in Baghdad was 9 hours per day, compared with 17 hours  per day in Basra. As we previously reported in May 2007, one of the  challenges in developing the electricity sector was the U.S. government’s  decision to install natural gas turbine engines despite the absence of a  natural gas distribution network. Of the 35 engines installed, 16 were using  diesel or crude oil rather than natural gas. As a result, maintenance was  three times as costly and electricity generated decreased by 50 percent.
Billions of dollars are still needed to rebuild, maintain, and secure Iraq’s  oil and electricity infrastructure, underscoring the need for sound strategic  planning. The Ministry of Electricity’s 2006-2015 Electricity Master Plan  estimates that $27 billion will be needed to reach its goal of providing  reliable electricity across Iraq by 2015. According to DOD, investment in  Iraq’s oil sector is “woefully short” of the absolute minimum required to  sustain current production, and additional foreign and private investment  is needed. Moreover, U.S. officials and industry experts estimate that Iraq  would need $20 billion to $30 billion over the next several years to reach  and sustain a crude oil production capacity of 5 million barrels per day.
We recommended that the Secretary of State, in conjunction with relevant  U.S. agencies and international donors, work with Iraqi ministries to  develop an integrated energy strategy. State commented, however, that the  Iraqi government, not the U.S. government, is responsible for taking action  on GAO’s recommendations. We believe that the recommendations are  still valid given the billions of dollars made available for Iraq’s energy  sector, the limited capacity of the Iraqi ministries, and the U.S.  government’s influence in overseeing Iraq’s rebuilding efforts.
section_title: Conclusion
paragraphs: U.S. efforts in Iraq are expansive: combating insurgents, training local  security forces, shaping government institutions, reconstructing  infrastructure, and enhancing public services. These efforts demonstrate a  substantial commitment to most aspects of nation building. However,  nation building is costly, particularly in the absence of a permissive  security environment. Since 2001, Congress has appropriated about $700  billion for military and diplomatic activities in support of the global war on  terrorism; the majority of this amount has supported U.S. actions in Iraq.  This large expenditure of resources and the enormous task at hand  heightens the levels of risk and offers the potential for fraud, waste, abuse,  and corruption.
But, as GAO’s audits point out, these risks are further heightened when  U.S. programs lack sound strategic planning, well-defined requirements,  adequate oversight and accountability, and sufficient training for  personnel. Future investments in Iraq will require decision makers not  only to assess the outcomes achieved thus far but also the outcomes that  could have been achieved with more efficient and effective use of  appropriated dollars. It will also require decision makers to consider  difficult trade-offs as the nation faces increasing fiscal challenges on the  home front. Nonetheless, continuing oversight by Congress and the  accountability organizations is needed to ensure that opportunities for  waste, fraud, abuse, and corruption are minimized.
In prior reports, GAO recommended that, to improve accountability and  minimize opportunities for fraud, waste, and abuse of U.S. funds, (1) DOD  adopt sound business processes in its acquisition strategies, such as  definitizing contracts in a timely fashion and strengthening accountability  procedures; (2) DOD leadership ensure implementation of and compliance  with existing guidance to improve its management and oversight of  contractors supporting deployed forces; and (3) U.S. agencies work with  Iraq to develop strategic plans for key sectors.
DOD and State have taken action to implement some, but not all, of our  recommendations. Given the billions of dollars that the United States has  spent in Iraq to help rebuild its infrastructure, improve security, support  our forces, and improve the capacity of the ministries, I believe our  recommendations, if fully implemented, would improve accountability and  outcomes. Whether they are fully implemented, however, will depend on  the leadership at each agency to set the appropriate tone, ensure that  existing guidance is effectively implemented, take actions to prevent  mistakes from being repeated, and seize opportunities to ensure that the  efforts to help rebuild and stabilize Iraq achieve their intended results.
Mr. Chairman, this concludes my statement. I would be pleased to answer  questions that you or other Members have at this time.
section_title: GAO Contact and Staff Acknowledgments
paragraphs: For questions regarding this testimony please call Joseph A. Christoff,  Director, International Affairs and Trade, on (202) 512-8979. Other key  contributors to this statement include David Bruno, Carole Coffey, Lynn  Cothern, Howard Cott, Timothy DiNapoli, Matthew E. Helm, Bruce  Kutnick, Tetsuo Miyabara, Judith McCloskey, Kathleen Monahan, and  James Reynolds.
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