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Diplomacy in Action

"HARD LESSONS: The Iraq Reconstruction Experience"

FPC Briefing
Stuart Bowen, Jr.
Special Inspector General for Iraq
Foreign Press Center
Washington, DC
April 14, 2009


Date: 04/14/2009 Location: Washington DC Description: Stuart Bowen, Jr., Special Inspector General for Iraq speaks on

2:00 P.M. EDT

Video

MODERATOR: The Office of the Special Inspector General for Iraq was created by Congress in 2004, to provide oversight to the Iraq Relief and Reconstruction Fund and all expenditures, obligations, and revenues related to Iraq reconstruction. Our guest today, Stuart Bowen, the Special Inspector General for Iraq, has been in that office since it was created. He was also Inspector General for its predecessor organization that was affiliated with the Coalition Provisional Authority.

We’re very pleased to have Mr. Bowen here today. He will speak in general about his mandate, but also specifically about “Hard Lessons”, which was the first comprehensive account of Iraq reconstruction that was published by SIGIR in late January of this year.

Mr. Bowen, welcome to the Foreign Press Center.

MR. BOWEN: Thank you, Mike, and thank you all, Salam alaikum, welcome. Mike and I were together in Baghdad for a period and he had to put up with our oversight of the Provincial Reconstruction Team program, and he did a great job along with everyone in that office, the Office of Provincial Affairs, which, as our most recent audit indicated, has made a lot of progress.

And I guess that’s sort of the watchword of what’s happened in Iraq over the last five years since I arrived on my first trip – I am leaving on my 23rd next week for a couple weeks. The story is progress, tough progress, progress that has cost a lot in blood and treasure, progress that has yielded a lot of hard lessons about the U.S. effort to help Iraq reconstruct itself, rebuild its military, revive its governance, and expand its capacity to provide basic services to Iraqis. Still a challenge today on the electricity and the water front, but the news is our next quarterly report will point out that electricity this quarter is at its highest level since the 2003 invasion. Hard-won progress, but progress nevertheless.

I arrived in Baghdad on my first trip the first week of February 2004, and I knew it was going to be a unique and challenging mission. When I was walking the halls of the Republican Palace, one of Saddam’s old palaces in central Baghdad, in Karkh, near the bend of the Tigris, I heard one person say to the other walking in front of me, “We can’t do that anymore. There’s a new inspector general here.”

And that was a sign that whatever “it” was, it was going to be difficult and challenging, and it has been. There was hundreds of millions of dollars of cash that I saw flowing out the doors of that palace during my first visit. It was all cash. It was an all-cash environment and indeed, it has been chiefly an all-cash operation because of the lack of electronic funds transfer – transfer capacity that was largely lost in the wake of the invasion.

That makes ensuring that the funds are controlled, and ensuring that people don’t commit crimes or cause waste, very difficult. My mission has been to do exactly that, though, and that’s to prevent fraud, waste and abuse, and to provide audits, inspections, and investigate crimes to deter bad conduct and to promote efficiencies and effectiveness in the Iraq program.

In the last five years, we’ve produced over 250 audits looking at everything from the control of weapons that were provided to the Iraqi army, while they weren’t very well-controlled, to the construction of the Nasiriya water treatment system, the single largest project in Iraq, $277 million, which when we visited was operating at about 20 percent capacity, to our next set of audits coming out in the next two weeks looking at asset transfer, how projects we finish are given over to Iraqi control. And this is our third review of that process and it’s a problem. Hundreds and hundreds of projects have been transferred unilaterally to the Iraqi Government because of the lack of a good system.

Our inspections entail traveling all over the country. I was in Anbar province six weeks ago looking at the bridge at the Mujara canal next to Lake Habbaniya, in between Ramadi and Fallujah. Much quieter than it used to be out that way, but nevertheless, notwithstanding the drop in conflict, to travel there I rode in an MRAP, a heavily armored U.S. vehicle created really in response to the IED problem in Iraq. It was very safe. We were driving up the road and they – the marine riding with me said, “Well, two days ago, we got hit by an IED.” It’s a little, you know, sign that to be on your toes is still good advice in even a much more stable Iraq. But he said it didn’t really affect anyone because the MRAPs are so well armored.

But our trip, thankfully, was very quiet. And I saw a project that was very well done, fairly complicated engineering, and executed by an Iraqi firm, which was encouraging and also frustrating at the same time because it was a sign of what could have been. As Hard Lessons point out, the U.S. program, which massively expanded beyond what was planned pre-war in 2003, was built upon large, international - what’s called ‘cost-plus’ contracts. And those are contracts open-ended, essentially, that pay for everything and – you know, success or failure, but pay for what is expected under the contract and a lot of waste occurred.

Fraud – we found it in our criminal investigations – 15 convictions to date. More coming, but waste has been the problem in the Iraq program, and that waste occurred because the wrong contracting mechanisms, in my opinion, were chosen to carry out this program. Eventually, I think partially in response to our audit, the U.S. program moved away from contracting for huge projects with international consortia to much more focused, narrower projects with Iraqi firms to the benefit of injecting capital in the Iraqi economy, providing employment, and creating capacity. It was unfortunate that a lot of waste occurred before that switch really came in 2007 – late 2006, 2007.

Now, with almost all of the 50 billion under contract and 80 percent of it spent, the Iraq reconstruction program is making, I think, its biggest or most effective dollar-for-dollar difference in Iraq. Again, a little frustrating since a large – most of the money is spent, yet now there’s an atmosphere permissive enough for programs to be carried out, but the funding is not there, not the funding that was (inaudible).

Four major funds that we oversee – one was the Iraq Relief and Reconstruction Fund, 21 billion for these large projects, these large contracts I was telling you about. The Iraq Security Forces Fund, 18 billion simply to train and equip, support the Iraqi police and the Iraqi army. The Commander’s Emergency Response Program, 3.5 billion cash provided to brigade commanders, U.S. commanders around for their areas of operations across Iraq to do small projects in the villages they encounter. And the Economic Support Fund, which – 3.7 billion supported the Provincial Reconstruction Teams that Mike worked on as well as a lot of operations and maintenance programs, and all of the Department of State and USAID community-building programs across the country.

So what have we learned over five years of oversight and what does “Hard Lessons” promote? Chapter 27 lays out 13 lessons, and you can find the full report online at www.sigir.mil,. Some of those lessons are self-evident, I think, and don’t carry out construction programs in an impermissive environment. That’s an axiom, but, in fact, it is also a lesson in Iraq.

Some of them are more concrete, like there needs to be a contingency federal acquisition regulation; that is, contracting regulations for conflict environments. It was much too slow, much too inefficient, and much too diffuse a process to use the Title 18 of the FARA and all its departmental variations on the ground in Iraq.

Develop systems for personnel and IT that keep track of what projects you’re accomplishing and that also maintain a database for those who are qualified to carry out unique missions in the field. We didn’t have that before the Iraq effort. And ultimately, that leads to the overarching lesson of Iraq, and that is, the United States should reform its approach to contingency operations, overseas contingency operations, because there is no one agency charged with managing it. Indeed, all of the leadership that I interviewed in for “Hard Lessons” complained about the lack of such a capacity.

The epigraph to chapter three from Secretary Rumsfeld, he told me: It’s long been a concern of mine that the U.S. Government lacks a standing capability in the area of reconstruction, and that there is no long-established team of civilians, let alone an experienced civil-military team, to handle the challenges of major post-conflict task. Emblematic of what I heard from many and certainly creating the case for reform.

And thus, this spring I’ve had one hearing on hard lessons regarding this reform. I believe more will come. And I think that if there is a golden moment for improving the U.S. approach to managing overseas contingency operations, that moment is now. And I think that the highest and best use of 250 audits, 400 investigations, many inspections, 23 trips to Baghdad, a lot of blood, sweat, and tears, and a lot of work by SIGIR and others over there, under great duress a – indeed, almost exactly a year ago, one of my auditors was killed by a rocket attack. But I think the tribute to their memory is to learn from Iraq, to improve how we approach contingency operations, and to implement the reforms necessary to ensure that future contingencies are better managed.

So that’s the story of my work to date and of hard lessons. And I’m happy to take your questions.

MODERATOR: Just one point, as usual, would you please identify yourself and your organization, and then wait for the microphone before you ask your question, please.

QUESTION: Thank you. Hello. This is Elmurr with BBC Arabic. In the last report you issued, you spoke about the Iraqi Government’s inability to spend their own resources, specifically oil resources, on the reconstruction effort. And now that you’re clearly amping up your message that you’re pulling out of Iraq, your attention is going back to Afghanistan, it is time for the Iraqi Government to spend their own revenues on reconstruction, what – where has the Iraqi Government failed, or why, to spend their own revenues? And what are you trying to tell them right now? What is your message to the Iraqi Government, and what is your message to the American taxpayers who have been complaining that their money’s going to a government that has clearly – now has more resources to spend?

MR. BOWEN: Well, the message to the U.S. taxpayers is the United States is no longer funding significant reconstruction efforts in Iraq. The era wherein we bear the burden, which lasted a long time – five years – for reconstruction has passed, and thus it’s squarely on the shoulders of the Government of Iraq.

When I met with the Minister of Planning Ali Baban last November, he complained about lack of funding, lack of capacity, to execute the capital programs that he believed are necessary to improve service delivery across Iraq. And that was not a new message I heard from him. It’s called budget execution. That’s the term of art. And the Iraqi Government’s capacity to execute its budget has been limited. It’s improved over the last six months. Again, ironically, in light of the fact that the amount of budget that they have to execute has dropped significantly in the same timeframe. They’ve had to downwardly revise their budget three times in the last six months, from upwards of 80 billion now to 52 billion for this year. That’s reflective of the collapse of world oil prices.

But regardless of percentages or how capable the Iraqi Government is at executing its budget, it is the resource, the engine for further reconstruction because U.S. money will not be forthcoming on this front. The U.S. will continue to spend funds for security to help the Iraqi police and the Iraqi army shoulder its responsibility for maintaining internal security and defending the borders. But with respect to reconstruction, other than Commander’s Emergency Response Program and some were being done by the PRTs, very little U.S.-funded construction will continue after the middle of this year.

That’s – the message there is that the Iraqis not only must continue to improve their capacity to spend their money, but address, I think, the soft underbelly of the government operation today, and that is corruption, because corruption siphons away funds that should be spent on providing services to all Iraqis. And the Iraqi people are frustrated with the level of corruption.

Prime Minister Maliki told me, when I met with him February, that he is – he’s going to take action this year, which I think are good words, but action is the key. 2008 he declared the year of fighting corruption, but not a lot happened other than the approval of UNCAC, the UN Convention Against Corruption. The chief law enforcement arm, the Commission on Integrity, hasn’t done very much since Judge Radhi left, or was forced out of the country, in 2007.

Interestingly, I met with the prime minister to return $13 million in Iraqi money that my investigators had recovered in the course of one of our investigations, which we expect to be able to continue to do as our cases unfold over the course of this year.

QUESTION: Nadia Bilbassy with Middle East Broadcasting Center, MBC TV. I have two questions. First, it’s often said that there is no national project in Iraq, that most of the reconstruction efforts have been done on sectarian lines, and therefore, it’s more open for corruption and lack of accountability. I just want your comment on that, if this is the case now?

And second, without going too much to the past, you have talked about waste as a major problem. How much was this set as a precedent by the Americans when they first went there, since you’ve been there since 2004, and how much now is being continued by the Iraqis?

MR. BOWEN: I think the problem of sectarian bias in service delivery within Iraq, it was fairly significant in 2005 and 2006, especially in Baghdad, but I don’t think it’s a significant problem today. But I don’t have – you know, there’s – it’s difficult to get data on this particular issue. Anecdotally, it was – you know, there were Shia sections of Baghdad that were receiving power, whereas, the Sunni sections weren’t. And that has, I think – those days have largely passed, although significant steps for new reconciliation need to be taken to ensure that they don’t resurface.

I think chief among the sectarian issues for the Government of Iraq right now is how to manage the Sons of Iraq, the 99,000 Sunnis who were employed effectively by the United States, funded, paid by them as part of a security effort to help pacify especially Baghdad province and Anbar. The process for integrating them back into Iraqi control, if you will, funded by the Government of Iraq, has been slow. And I think that recent events have been problematic, particularly the arrest of one of the leaders of the SOI a couple of weeks ago that led to an outbreak of violence in Baghdad.

And your second question? I’m sorry.

QUESTION: Waste.

MR. BOWEN: Waste – whether waste continues. You know, it does. I think less so, though. I mean, the waste that I saw early on was because there were very large international corporate contracts that essentially were being executed by subcontractors and subcontractors to them. So the money that actually reached the ground in Iraq was much less than the amount appropriated, the amount put under contract, because it was diluted through a series of subcontracting events. And that’s why the cost-plus contract approach was fundamentally wasteful. And then it – and then further waste ensued because it was too difficult to carry out projects, too dangerous, unless these very large contracting corps were on the ground in Iraq, but not able to work, wasting money that was meant to build schools and roads and water treatment plants.

Today, in the era of fixed-price contracts, waste is more manageable. The issue is corruption. And as Minister Baban told me, corruption is worse now than it’s ever been, because it infects every level of the Iraqi Government. And for Iraq to succeed in the fight against what we call the second insurgency, it must invest in its own capacity to enforce the rule of law.

QUESTION: Alexander Panov, RTVI, Russian Television. During Ambassador Bremer time, it was from 9 to 15 billion dollars of American taxpayers, which was spent without any accountability. Do you expect that there would be some? What do you think about possibility of litigation maybe to find who is guilty for this money, the waste? What do you think about the possibility?

MR. BOWEN: Actually, during Bremer’s period, he was spending Iraqi money, the Development Fund for Iraq. The money that he wanted to spend on the Iraq relief and reconstruction effort never made it to the ground, so to speak, because it took that long for contracting to occur. But you’re right; my audits exposed that there were insufficient controls over the Coalition Provisional Authority’s management of Iraqi money of which – it doesn’t matter really who it belonged to. He and the Coalition Provisional Authority was responsible for it, and he had a fiduciary duty to ensure it was properly spent, properly managed. And our audit of about 9 billion of it showed that the controls were inadequate.

I don’t know the status of or whether there is potential litigation over that. I know that the Iraqi Government maintains a very high interest into what happened to that money and continues to carry out its own investigations and audits in that regard, and it may lead to such litigation.

MODERATOR: Any more questions?

MR. BOWEN: Good.

QUESTION: My name is (inaudible) from (inaudible) TV. I’m asking about the coordination and cooperation between your agency and the Iraqi Government, because sometimes there is projects being built by the U.S. forces or your agency and supposed to be handed to the Iraqi authorities or provincial councils in the cities. But when it comes to hand it to them, the provincial council refused to --

MR. BOWEN: That’s right.

QUESTION: -- to take them because they have no idea about the project itself, and they don’t have the people to run this. So how you are working on this?

MR. BOWEN: Well, we are auditing it, and auditing the problems on that issue. And you’re exactly right; it’s been a longstanding problem. This is our third audit of what’s called asset transfer, and the audit will be out in two weeks and will underscore the reality that there has been little improvement in coordinating this transfer. There’s still no agreement between the Government of Iraq and the United States on what projects are to be transferred and how they’re to be transferred. And that’s inefficient and wasteful and unfortunate, because a lot of investment was provided by the United States and it was poorly managed.

Yes.

QUESTION: If I’m not wrong, on the new agreement with Iraqi Government, there is no more immunity for U.S. contractors in Iraq. What do you think the case of Blackwater guards affected this point of the agreement, and what do you think about possibility for this trial inside the United States and its influence on the Iraqi Government and Iraqi society?

MR. BOWEN: Well, you’re right; I think that the Blackwater case did drive that particular immunity waiver. The CPA had a provision in its charter that allowed immunity for all contractors, all U.S. personnel for any issue, and that stayed in effect until January 1st of this year. I don’t have anything to say about the Blackwater trial. Those issues are ongoing. But I think that the people of Iraq are playing very close attention to it.

We noted in our October quarterly report that the waiver of immunity then-pending could lead to a contractor exodus. I haven’t really seen that, but I think we’re going to see contractors continuing to leave Iraq not so much because of the immunity waiver, but because their reconstruction program is rapidly winding down.

MODERATOR: Ladies and gentlemen, additional questions?

MR. BOWEN: Good. All right. Thank you very much.

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