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Investigators Warn House Panel That More Iraq Waste Is Likely

The U.S. government has squandered as much as $10 billion in public money on Iraq reconstruction aid because of overcharges and unsubstantiated expenses. More is yet to come, federal investigators said Thursday.

The three top auditors overseeing work in Iraq told a House committee their review of $57 billion in Iraq contracts found that Defense and State department officials condoned or allowed repeated work delays, bloated expenses and payments for shoddy work or work never done.

More than one in six dollars charged by U.S. contractors were questionable or unsupported, nearly triple the amount of waste the Government Accountability Office estimated last fall.

"There is no accountability," said David M. Walker, who heads the auditing arm of Congress. "Organizations charged with overseeing contracts are not held accountable. Contractors are not held accountable. The individuals responsible are not held accountable."

"People should be rewarded when they do a good job. But when things don't go right, there have to be consequences," he said.

Also testifying Thursday were Stuart Bowen, the special inspector general for Iraq reconstruction, and William H. Reed, director of the Defense Contract Audit Agency.

The appearance before the House Oversight and Government Reform Committee came as Congress prepares for a showdown with President Bush next month over his budget request of nearly $100 billion for the wars in Iraq and Afghanistan.

So far, the Bush administration has spent more than $350 million on the Iraq war and reconstruction effort.

The Army, which handles most of the Iraq contracting, said Thursday it had not reviewed the latest contract figures.

"The U.S. Army, along with the Departments of Defense and State, continue to help thousands of Iraqis daily with reconstruction projects to provide them with better lives," said spokeswoman Mary Ann Hodges. "We look forward to examining its findings and applying some of its recommendations in the future."

Senate Democrats said recently cited cases of waste were "outrageous rip-offs of the American taxpayer" and introduced legislation Thursday to stiffen punishment for war profiteers and cut down on cronyism in contracting.

According to their testimony, the investigators:

— Found overpricing and waste in Iraq contracts amounting to $4.9 billion since the Defense Contract Audit Agency began its work in 2003. Some of that money has been recovered. An additional $5.1 billion in expenses were charged without proper documentation.

— Pointed to growing Iraqi sectarian violence as a significant factor behind bloated U.S. contracting bills. Iraqi officials, they said, must begin to take primary responsibility for reconstruction efforts. That is an uncertain goal, given the widespread corruption in Iraq and the local government's inability to fund projects.

— Urged the Pentagon to reconsider its growing reliance on outside contractors in wars and reconstruction efforts. Layers of subcontractors, poor documentation and lack of strong contract management are rampant and promote waste even after the GAO first warned of problems 15 years ago.

Walker complained that GAO investigators have difficulty getting basic detail about reconstruction contracts such as expenses and subcontractors involved because many Pentagon divisions fail to consistently track or fully report them.

"It's absolutely essential if Congress wants to make an informed decision on authorizations and appropriations that we get this information," he said. "We're talking about billions of dollars and thousands of American lives at stake."

Rep. Henry Waxman, D-Calif., the committee chairman, has pledged scores of investigations of fraud, waste and abuse — with subpoenas if necessary — on the administration's watch.

Of the $10 billion in overpriced contracts or undocumented costs, more than $2.7 billion were charged by Halliburton Co., the oil-field services company once headed by Vice President Dick Cheney.

Noting that auditors still have $300 billion of Iraq spending to review, Waxman said the total amount of waste, fraud and abuse "could be astronomical."

"It's no wonder that taxpayers all across our country are fed up and demanding that we bring real oversight to the 'anything goes' world of Iraq reconstruction," he said.

Rep. Tom Davis of Virginia, the committee's top Republican, said "poor security, an arcane, ill-suited management structure, and frequent management changes have produced a succession of troubled acquisitions."