Iraq Reconstruction Audit Reports High Spending on Administrative Costs

Administrative costs for a handful of reconstruction projects in Iraq ate up 11 percent to 55 percent of the total costs and were not monitored well by officials there, according to a U.S. government audit.

The audit, done by the Special Inspector General for Iraq Reconstruction, looked at a number of contracts and detailed five totaling $1.3 billion (euro1.04 billion). It found that more than $460 million (euro366.8 million) was spent on overhead costs, including transportation, mobilization, administration, personnel support and security.

The report suggested that some of the costs may be underestimated because the government did not consistently track the administrative amounts or require companies to report them in the same way. The U.S. Congress has approved $18.4 billion (euro14.67 billion) in reconstruction money for Iraq.

Click Here to Visit's Iraq center.

The administrative costs largely occurred between the date the contractors arrived in Iraq to begin the project and the time when substantial work began. Often, the companies were in Iraq for months before they were actually able to begin work on their reconstruction project, said Jim Mitchell, a spokesman for the reconstruction oversight agency.

Halliburton subsidiary Kellogg, Brown & Root accrued the highest percentage of overhead costs — billing the government for $163 million (euro129.97 million), or 55 percent of its total contract cost, the audit found. Parsons Iraq Joint Venture, a second company, had overhead costs equaling nearly $134 million (euro106.85 million), or 43 percent of its total project cost.

Parsons Delaware, in two different projects, received 35 percent and 17 percent in administrative costs, or $108 million (euro86.12 million) and $41.6 million (euro33.17 million) respectively. The fifth project detailed in the audit was with Lucent, which received nearly $15 million (euro11.96 million) in overhead costs, or 11 percent of the total project amount.

Poor planning by the government contributed to the KBR costs, the audit said. And it also noted that the 11 percent figure for Lucent was probably underestimated.

The Iraq reconstruction audits have routinely found significant problems with the contracting and building in the war-torn country, ranging from alleged fraud to lack of oversight. They have also noted that contractors often face significant obstacles and other business problems, particularly with security, in Iraq.

The audit recommended that more specific reporting requirements be adopted for the reconstruction project that would detail the administrative costs and that contractors are monitored better. It also recommended that the government plan better to reduce the amount of time contractors spend mobilized for the work before they are actually able to begin the project.

Click Here to Visit's Iraq center.