We reviewed reconstruction contracts that had been funded, in whole or in part, with U.S. appropriated funds. We focused our review on new contracts, modifications, task orders under existing contracts, and contract actions using the General Services Administration’s (GSA) federal supply schedule program as of September 30, 2003. We did not review contracts that were funded entirely with international or Iraqi national funds, such as funds seized after the 1991 Gulf War or funds that were discovered during Operation Iraqi Freedom in 2003. We also did not review contracts or task orders that were used only for support of military operations or grants and cooperative agreements awarded to international or nongovernmental organizations. We continue to evaluate various issues related to military operations and the progress in rebuilding Iraq under separate reviews. To determine the number of reconstruction contract actions, the types of contract actions, the procedures used to make the awards, and the funding sources, we requested information from each of the principal organizations responsible for rebuilding activities in Iraq: the CPA, the Office of the Secretary of Defense, the Department of the Army, the Army Corps of Engineers, USAID, and the Departments of State and Justice. To verify the information provided, we requested copies of each contract action issued as of September 30, 2003, and corrected the information provided as appropriate. Agency officials could not provide the contract files for a limited number of small-dollar contracts awarded during the early stages of the reconstruction effort. To determine the amount obligated for reconstruction, we primarily used the obligation data recorded in the contracts. We also reviewed the data maintained by the agencies’ budget offices and information reflected in the Office of Management and Budget’s (OMB) quarterly status reports. To obtain information on contract activities since September 2003, we interviewed CPA and agency officials, attended industry day conferences, and reviewed solicitations and other relevant agency documents. To determine whether agencies had complied with applicable laws and regulations governing competition when awarding contracts and issuing task orders, we reviewed the requirements of the Competition in Contracting Act (CICA) of 1984 and other relevant laws and regulations. We judgmentally selected 25 contract actions, consisting of 14 new contracts awarded using other than full and open competition and 11 task orders issued under existing contracts. These 25 contract actions represented about 97 percent of the total dollars obligated for reconstruction through September 30, 2003. New contracts accounted for nearly 80 percent of this spending. We selected the 25 contracts or task orders based on various factors. We focused on high-dollar value contracts and task orders, and on contracts awarded using other than full and open competitive procedures. We also considered whether audits by the DOD or USAID Inspectors General were under way. Overall, the 25 contracts or task orders consisted of the following: the largest contract awarded and the 4 largest task orders, by dollar value, issued to support CPA operations; 9 contracts awarded and 1 task order issued by USAID, as well as 1 task order issued under an Air Force contract to provide logistical support for USAID-managed efforts; 2 contracts awarded and 4 task orders issued by the Army Corps of Engineers and the Army Field Support Command to help restore Iraq’s oil or electrical infrastructure; 1 contract awarded and 1 task order issued by the Army to train or equip the New Iraqi Army; and 1 contract awarded by the Department of State to support Iraqi law enforcement efforts. For new contract awards, we determined whether agency officials followed appropriate procedures in using other than full and open competition and assessed the agency’s justification for its contracting approach. For task orders issued under existing contracts, we determined whether the task orders were within the scope of the existing contracts, and if not, whether the agencies had followed proper procedures to add the work. To do so, we obtained the contracts or task orders and associated modifications, justification and approval documentation, negotiation memoranda, audit reports, and other relevant documents. We discussed the award and issuance process with agency procurement personnel, including contracting officers, program managers, and, in some cases, agency counsel. We also reviewed audit reports on various procurement issues prepared by the DOD and USAID Inspectors General and the Defense Contract Audit Agency (DCAA). To assess agencies’ initial contract administration efforts, we interviewed procurement officials to determine how contract administration for their contracts was initially staffed, including the use of support contracts to assist in administering the contracts. We obtained information on plans for reaching agreement on key contract terms and conditions. We also reviewed the 25 contracts or task orders to determine whether they included provisions related to contract administration, such as quality assurance plans, requirements for monthly status reports, and subcontractor management plans. As part of our monitoring of reconstruction activities, we conducted field visits in October 2003 in Baghdad and in other areas in Iraq, including Al Hillal and Al Basrah. During these visits, we held discussions with officials and visited project sites, including power plants, oil wells, oil processing facilities, water and sewage systems, schools, and many other reconstruction activities. During these visits, we observed the challenges faced in carrying out reconstruction efforts, including the hostile security environment, poor communications, and unsettled working conditions. Appendix I lists the agencies visited during our review. We conducted our work between May 2003 and April 2004 in accordance with generally accepted government auditing standards. During the latter part of 2002, as diplomatic efforts to convince the former Iraqi regime to comply with United Nations Security Council resolutions continued, discussions took place within the administration about the need to rebuild Iraq should combat operations become necessary. In October 2002, OMB established a senior interagency team to establish a baseline assessment of conditions in Iraq and to develop relief and reconstruction plans. According to an OMB official, the team developed plans for immediate relief operations and longer-term reconstruction in 10 sectors: health, education, water and sanitation, electricity, shelter, transportation, governance and the rule of law, agriculture and rural development, telecommunications, and economic and financial policy. Though high-level planning continued through the fall of 2002, most of the agencies involved in the planning were not requested to initiate procurement actions for the rebuilding efforts until early in 2003. Once assigned the responsibilities, agency procurement personnel were instructed to be ready to award the initial contracts within a relatively short time period, often within weeks. During 2003, several agencies played a role in awarding or managing reconstruction contracts, most notably USAID and the Army Corps of Engineers. Various agencies awarded contracts on behalf of the CPA and its predecessor organization, the Office of Reconstruction and Humanitarian Assistance. Table 1 shows the principal areas of responsibility assigned to the CPA and other agencies. As of September 30, 2003, the agencies had obligated nearly $3.7 billion on 100 contracts or task orders for reconstruction efforts (see table 2). These obligations came from various funding sources, including U.S. appropriated funds and Iraqi assets. The Army Corps of Engineers and USAID together obligated about $3.2 billion, or nearly 86 percent of this total. The majority of these funds were used to rebuild Iraq’s oil infrastructure and to fund other capital-improvement projects, such as repairing schools, hospitals, and bridges. This spending reflects a relatively small part of the total amount that may be required to rebuild Iraq, with estimates ranging from $50 billion to $100 billion. Appendix II lists the 100 reconstruction contracts and task orders we identified and the associated obligations as of September 30, 2003. In November 2003, Congress appropriated an additional $18.4 billion for rebuilding activities. The CPA’s projected uses for the funds reflect a continued emphasis on rebuilding Iraq’s infrastructure and on providing improved security and law enforcement capabilities (see table 3). In appropriating these funds, Congress required that the CPA Administrator or the head of a federal agency notify Congress no later than 7 calendar days before awarding a contract, with these funds, valued at $5 million or more for reconstruction using other than full and open competition procedures. U.S.-funded reconstruction efforts were undertaken through numerous contracts awarded by various U.S. agencies. CICA generally requires that federal contracts be awarded on the basis of full and open competition— that is, all responsible prospective contractors must be afforded the opportunity to compete. The process is intended to permit the government to rely on competitive market forces to obtain needed goods and services at fair and reasonable prices. Within this overall framework, agencies can use various procurement approaches to obtain goods and services. Each approach, as listed in table 4, involves different requirements with which agencies must comply. In some cases, agency officials may determine that a contractor working under an existing contract may be able to provide the required goods or services through issuance of a task order, thus obviating the need to award a new contract. Before awarding a task order under an existing contract, however, the agency must determine that the work to be added is within the scope of that contract (i.e., that the work fits within the statement of work, performance period, and maximum value of the existing contract). In making this determination, the contracting officer must decide whether the new work is encompassed by the existing contract’s statement of work and the original competition for that contract. Agencies generally complied with applicable laws and regulations governing competition when using sole-source or limited competition approaches to award the initial reconstruction contracts we reviewed. The exigent circumstances that existed immediately prior to, during, and following the war led agency officials to conclude that the use of full and open competitive procedures for new contracts would not be feasible. We found these decisions to be within the authority provided by law. We found several instances, however, in which agencies had issued task orders for work that was outside the scope of existing contracts. Such task orders do not satisfy legal requirements for competition. In these cases, the out-of-scope work should have been awarded using competitive procedures or supported with a Justification and Approval for other than full and open competition in accordance with legal requirements.