Corruption was big winner

Two weeks ago, on the 10th anniversary of the Iraq war, I wrote a column that laid out the losers in the conflict. I argued there were still no clear winners.

One reader responded that there are obvious winners: the private civilian contractors who provided security and supplies for the war effort and were paid tens of billions of dollars by the U.S. government. A hefty chunk of those billions was wasted due to overbilling, shoddy work and fraud.

The reader was correct (although I disagree with his assertion that we began the war in order to fuel the military-industrial complex). He fingered an important problem we still haven’t come to grips with: Our military and civilian agencies seem unable to conduct massive nation-building efforts in war zones effectively, or to supervise the private contractors to whom we often outsource this job.

In 2011, a bipartisan congressional commission estimated that between $31 billion and $60 billion of the $206 billion paid to contractors since the start of the Iraq and Afghanistan wars had been wasted. The heart of the problem, said the Commission on Wartime Contracting in Iraq and Afghanistan, is excessive reliance on badly supervised private contractors engaging in “vast amounts of spending for no benefit.”

Anyone who has spent time in Iraq could testify to the truth of those words.

One man with particular knowledge of the problem is Stuart Bowen, the special inspector general for Iraq reconstruction, whose agency (referred to as SIGIR) has documented the failings of Iraq reconstruction and some of its most egregious contractor fraud. Speaking last week at the Center for Strategic and International Studies in Washington, Bowen warned: “We have yet to learn our lessons” from Iraq (or Afghanistan) when it comes to nation-building under fire.

I’ll get back to Bowen’s lessons, but first a word about our runaway spending on war contractors. In Iraq, our reliance on contractors – who provided many of the services that used to be carried out by grunts in the regular Army – permitted the military to hold down the number of troops sent to the country. It also permitted the government to go to war without reinstituting the draft.

In 2008, at the height of the war, the Congressional Budget Office estimated that one of every five dollars spent on the Iraq war had gone to contractors; at that point, the contracts were worth about $85 billion. That year, contractors employed about 180,000 people in Iraq – often from third-world countries – who worked as bodyguards, translators, construction workers, launderers, cooks and drivers. They amounted to a second private army that was larger than the U.S. military force in Iraq.

This was a setup designed (intentionally or not) for favoritism and fraud.

Perhaps the biggest beneficiary of the contract largesse, as you may recall, was Kellogg Brown & Root, or KBR, then a subsidiary of Halliburton Co. – whose CEO from 1995 to 2000 was Dick Cheney. KBR received huge, no-bid government contracts and reaped tens of billions of dollars for its Iraq work. A highly placed Pentagon procurement officer who tried to blow the whistle on some KBR contracts was drummed out of her job in 2005. In 2009, Halliburton agreed to pay $559 million to the U.S. government to settle corruption charges linked to KBR.

SIGIR has documented scores of egregious scams, including one that featured a Kuwait-based U.S. contractor who reaped millions by bribing corrupt American military officers to give him contracts. The agency estimates that at least $8 billion of $60 billion spent on Iraq reconstruction was “wasted.” I’d guess the number is probably much higher.

The most frustrating aspect of the contracting problem is that it was so obvious from the start of the Iraq war. With so much U.S. money flowing into Iraq – often in bricks of cash – almost any scamster could qualify as a contractor and reap millions, such as the two adventurers who won a $16 million contract to guard the Baghdad airport even though they had no experience. Iraqi friends of mine in Baghdad constantly told me stories of rip-offs by Iraqi and American wheeler-dealers, and then asked in amazement why the Americans let them continue.

The answer, as Bowen makes clear, was (and is) systemic. It involved not only the United States’ need to rely on contractors, but also its officials’ inability to track the money allotted as well as their unwillingness to consult with locals on what projects were really needed and workable.

With different agencies and often different allied countries providing funds, auditing systems were disjointed. Auditors were often unable to penetrate foreign cultures or ensure that projects were actually completed in conflict areas they couldn’t visit.

Bowen gives a perfect example: a $300 million water-treatment plant built in the southern Iraqi city of Nasiriyah. The plant is only 20 percent operational. The grandiose plan didn’t take into consideration that the system was too powerful for the available water pipes, or that the local tribe, whose members got control of the project, didn’t have the skills to operate it.

When money is thrown at nation-building projects without sufficient security or civilian-military coordination, and when it exceeds what local systems can absorb or manage, the only real beneficiaries are the contractors. U.S. taxpayers lose, Iraqis don’t gain and the end result fuels Iraqi and American suspicions about the real motives behind the efforts.

SIGIR is about to shut down; its final report is titled “Lessons From Iraq.” It’s unclear whether the U.S. government has absorbed them.

And if you think this problem no longer exists now that we’ve left Iraq, think again. The same problems still bedevil projects in Afghanistan. Future nation-building efforts beckon as we confront failed states in Syria, Libya and Yemen, or stay on in Kabul after 2014. There, too, contractors may have the most to gain.