Thursday, September 13, 2012

The Costs Of Mismanaging Iraq’s Reconstruction

To say that the United States ran into problems trying to rebuild Iraq after the 2003 invasion would be a massive understatement. America was beset by a plethora of difficulties, because it had completely failed to adequately plan for post-war Iraq. After the fall of Saddam Hussein’s government the U.S. ran into even more issues such as the total collapse of the Iraqi administration, the looting, and growing violence. The Americans came up with one organization after another that was supposed to manage all the reconstruction work, but never seemed to be able to get over the hump. There were too many regulations, contradictory chains of command, changing goals and requirements, lack of qualified and adequate numbers of staff, a high turnover rate, poor management practices, huge cost overruns, and a lack of oversight. It’s for those reasons that the American effort to put Iraq back together can be considered a failure.

The U.S. always had problems creating a coordinated management system for rebuilding Iraq. The Americans came up with various offices, each with its own acronym, to deal with the task, but those often created more problems than solutions. For example, the Coalition Provisional Authority (CPA) had the Program Management Office (PMO) and the Head of Contracting Activity. At the same time, the United States Agency for International Development (USAID) and the military ran independent reconstruction efforts. After the CPA ceased operating in 2004, the White House established the Iraq Reconstruction and Management Office (IRMO) and the Project and Contracting Office (PCO). That didn’t end the USAID and military’s work however. To add to the problems there was never one single person in charge. The IRMO for instance, answered to the State Department, while the PCO was under the Pentagon. Each time a new organization was created, it was supposed to centralize control over reconstruction projects, but what they ended up doing was adding another layer of bureaucracy, and never solved the contradictory chain of command.

Many of these offices never had the staff to carry out their duties either. In February 2004, General Stephen Seay took over the CPA’s Head of Contracting Activity. What he found was a body that lacked staff, and was overwhelmed with hundreds of contracts. He was supposed to have 69 employees, but he usually only had two-thirds that number. Many of his workers were also not qualified to with companies. That meant that his office regularly could not come up with good requirements for job orders. As a result, General Seay tried to re-organize the body, and went on recruiting drives to bring in people more suited to the task at hand. He never seemed to get over the hump however as the Head of Contracting never got enough qualified people. These problems trickled down throughout the system.

A typical contract went through a large number of steps that usually led to huge cost overruns. The Pentagon might award a contract to a company. It was then planned and managed by the CPA’s Program Management Office or its successor the Project and Contracting Office. Those two would come up with schedules, budgets, and completion dates for the work. The Head of Contracting Activity would then come up with task orders that the PMO or PCO would give to businesses. Up until 2005, there was no centralized system to keep track of the contracts however. Each agency basically had its own system, which was not shared with the others. That meant the PMO and PCO didn’t have enough information to come up with good requirements for the contracts. All of these offices lacked adequate and qualified staff, which meant they often didn’t have enough people to negotiate with the contractors. At the same time, there were an increasing number of regulations put in place to try to oversee all this work, which dragged out the process. Many companies sat idle waiting for orders to go through, while they were still getting paid. From 2004-2005 for example, five major contractors gave invoices to the U.S. for $62.1 million in overhead costs, and only $26.7 million for actual work. What the U.S. ended up doing in Iraq was creating one bureaucracy on top of another, with each answering to a different master, with more and more rules to follow, and not enough people to carry them out. This dragged out the contracting process, which led to bigger and bigger costs.

The nature of many of the contracts given out in Iraq created another dilemma. The U.S. tended to favor cost-plus contracts for companies working on reconstruction. Those meant the government had to pay for all expenses whether a project was finished or not. That led to increasing costs, and pressure from Baghdad and Washington to fix the issue. The result was a quicker contracting process with different types of deals made, but with many details not worked out with the businesses beforehand. The lack of specifics in turn, led to more waste and bigger bills. Again, another troubling trend in the rebuilding effort was replayed. Each time the U.S. tried to solve one of its problems rebuilding Iraq it seemed to create new ones.

America tried to reform and re-organize its reconstruction effort in Iraq several times throughout the years. Each time, new offices were created, and new regulations were implemented. These tended to add to the difficulties rather than alleviate them. On top of that, the U.S. never seemed to realize the institutional shortcomings of its effort. That was the fact that there was never one person at the top who was in charge of everything. Instead, the Pentagon, State Department, and USAID maintained their own operations that tried to work together, but often clashed with each other. The result was a lot of wasted time and money. Many Iraqis believed that a country as rich and powerful as the United States could rebuild Iraq quickly and efficiently. What they didn’t know was that the Americans created a dysfunctional system that proved not up to the task.


Special Inspector General for Iraq Reconstruction, “Hard Lessons,” 1/22/09

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