Full report:
http://www.publicintegrity.org/wow/default.aspx
Windfalls of War - The Center for Public Integrity
Winning Contractors
Cutting Through the Fog of War
Outsourcing Government
Oil Immunity?
A Family Connection
Anatomy of a Contract
Contracts With Provisional Authorities
Contractors (alphabetical list)
Iraq
Afghanistan
Contractor Ranking
Contractors by campaign $
Contractors by contract history
From the Executive Director
Additions and Corrections
Resources
"Contractor Ranking", "Contractors by campaign $", and "Contractors
by contract history" all have links to in-depth reports on each
company:
Contractor Ranking
http://www.publicintegrity.org/wow/resources.aspx?act=total
Contractors by campaign $
http://www.publicintegrity.org/wow/resources.aspx?act=contrib
Contractors by contract history
http://www.publicintegrity.org/wow/resources.aspx?act=history
-------------
http://www.corpwatch.org/issues/PID.jsp?articleid=8910
CorpWatch.org
U.S. Contractors Reap the Windfalls of Post-war Reconstruction
By Maud Beelman
Center for Public Integrity
October 30, 2003
WASHINGTON - More than 70 American companies and individuals have won
up to $8 billion in contracts for work in postwar Iraq and
Afghanistan over the last two years, according to a new study by the
Center for Public Integrity. Those companies donated more money to
the presidential campaigns of George W. Bush -- a little over
$500,000 -- than to any other politician over the last dozen years,
the Center found.
Kellogg, Brown & Root, the subsidiary of Halliburton which Vice
President Dick Cheney led prior to being chosen as Bush's running
mate in August 2000 was the top recipient of federal contracts for
the two countries, with more than $2.3 billion awarded to the
company. Bechtel Group, a major government contractor with similarly
high-ranking ties, was second at around $1.03 billion.
However, dozens of lower-profile, but well-connected, companies
shared in the reconstruction bounty. Their tasks ranged from
rebuilding Iraq's government, police, military and media to providing
translators for use in interrogations and psychological operations.
There are even contractors to evaluate the contractors.
Nearly 60 percent of the companies had employees or board members who
either served in or had close ties to the executive branch for
Republican and Democratic administrations, for members of Congress of
both parties, or at the highest levels of the military.
The results of the Center's six-month investigation provide the most
comprehensive list to date of American contractors in the two nations
that were attacked in Washington's war on terror. Based on the
findings, it did not appear that any one government agency knew the
total number of contractors or what they were doing. Congressional
sources said they hoped such a full picture would emerge from the
General Accounting Office, which has begun investigating the postwar
contracting process amid allegations of fraud and cronyism.
The Center's investigation focused on the three agencies that awarded
most of the Iraq and Afghanistan contracts in 2002 and 2003 - the
Pentagon, the State Department and the U.S. Agency for International
Development. It found that nearly every one of the 10 largest
contracts awarded for Iraq and Afghanistan went to companies
employing former high-ranking government officials or individuals
with close ties to those agencies or Congress.
In addition, those top 10 contractors were established political
donors, contributing nearly $11 million to national political
parties, candidates and political action committees since 1990,
according to an analysis of campaign finance records.
Indeed, most of the companies that won contracts in Iraq and
Afghanistan were political players. According to the Center's
analysis, the companies, their political action committees and their
employees contributed a total of nearly $49 million to national
political campaigns and parties since 1990. Donations to Republican
Party committeesthe Republican National Committee, the Republican
Senatorial Campaign Committee and the National Republican
Congressional Committeeoutpaced those to Democratic committees, $12.7
million to $7.1 million. Among individual candidates, President
George Bush received more money from these companies than any other,
a little over $500,000.
The Center's investigation found that 14 of the contractors were
awarded U.S. government work in both Iraq and Afghanistan. Combined,
those companies gave nearly $23 million in political contributions
since 1990, and 13 employ former government officials or have close
ties to various agencies and departments.
Although Afghanistan was once ground zero in Washington's war on
terrorism, spending on Iraq was more than double that on Afghanistan.
According to the Center's investigation, which examined contracts
awarded in 2002 through September 2003, at least $5.7 billion in
government funding was slated for U.S. contractors in Iraq, compared
to nearly $2.7 billion for Afghanistan. Osama bin Laden's al Qaeda
network, blamed for the Sept. 11, 2001 attacks on the United States,
had been based in Afghanistan, and prior to the March 2003 war on
Iraq, U.S. officials had said that a democratic Afghanistan was
central to winning the war on terror.
The Center's findings are based, in part, on 73 Freedom of
Information Act requests and appeals to USAID, the Pentagon and its
various uniformed services and the State Department, as well as an
analysis of the General Services Administration database of contracts
from 1990 through fiscal year 2002 - more than 7 million federal
contract actions, in all.
Response to the Center's FOIA requests was sporadic, at best, and on
Oct. 29, the Center filed suit in the U.S. District Court in
Washington, D.C., against the State Department and the Army after
both agencies failed to respond fully to its request for information
as outlined under FOIA law.
For example, media accounts have noted that the State Department has
a contract with DynCorp for work in Iraq worth at least $50 million,
which reportedly could grow in value to as much as $800 million under
the administration's new spending request for Iraq. The Department of
State did not respond to Center requests for information about this
or any of its other contracts in Iraq or Afghanistan.
The U.S. Army Corps of Engineers awarded a contract to the
Halliburton subsidiary Kellogg, Brown & Root, potentially worth
billions under an omnibus military contract known as "indefinite
quantity-indefinite delivery," which is one of the largest of its
kind in U.S. history. Although the Pentagon released one KBR "task
order," or work assignment, to the Center, there are more than 30
such orders for Iraq.
Because of inconsistent and scarce information, the total value of
contracts awarded for reconstruction work in Iraq and Afghanistan may
be greater than what is publicly known. The Center found that there
was no uniformity across the government in how contract values were
reported. For example, the amount listed for an individual contract
either represented only what had been paid to date on a multiyear
contract, or a minimum and maximum dollar range of the contract, or,
in some instances, a single figure, without any specification as to
whether it represented a first payment, a first-year total, or a
multiyear total. In some instances, the Center could determine
nothing about what a particular contract cost or entailed because
neither the company nor the government agency responsible for it
would divulge that information.
Contractor confusion
The difficulty in obtaining contract amounts and the contradictory
information coming from within government departments raise questions
about management and oversight of the reconstruction effort. Although
USAID has said that "to ensure that U.S. tax dollars are utilized
efficiently and effectively, USAID is providing a transparent
monitoring and evaluation system to ensure that contractors are
meeting their goals and staying on schedule," the Center's
investigation suggested otherwise.
For example, in a list of contracts initially provided to the Center
under FOIA, both USAID and the Pentagon omitted the largest contracts
they had awarded in Iraqto Bechtel and to Halliburton's KBR
subsidiary. Also omitted from the Pentagon's list were major defense
contractors such as Fluor, Washington Group International and Perini
Corporation, each of which stands to earn up to $500 million for its
Pentagon work in Iraq, Afghanistan and other countries. Combined, the
three companies and their subsidiaries have won more than $11 billion
dollars in U.S. government contracts from 1990 through fiscal year
2002.
Contracts awarded by USAID to Chemonics International Inc., a
private, for-profit aid company based in Washington, D.C., provide a
textbook study in the apparent confusion surrounding the contracting
process.
According to information provided by USAID under a Freedom of
Information request, Chemonics was contracted to work in Afghanistan
for just over $600 million. That total would rank Chemonics third
among all U.S. contractors in Iraq and Afghanistan, behind only
Halliburton and Bechtel. However, the company disputed that total
when contacted, at first insisting it had three contracts with USAID
worth just $133.9 million, then changing its figures a day later to
say that one multiyear contract it had originally put at nearly $1.2
million actually had a potential worth of $35 million for work in
Afghanistan and several other countries.
Getting clarification of the numbers from USAID was difficult. "I
dont know where the FOIA office got that information," said one USAID
press officer. Chemonics refused to release copies of its contracts,
and a Center FOIA request for the contracts is pending. After several
queries, the FOIA office told the Center that the contract it had
listed as being worth $600 million was actually worth between
$599,000 and $1.2 million, which was still inconsistent with the
numbers Chemonics provided.
"We dont dispute it," Chemonics spokesperson Denise Felix told the
Center when asked about the USAID number. "It is not accurate for
us." In general, contract amounts provided under FOIA varied widely;
often the value given by an agency was for the first year's work
only, not the designated total on a multiyear contract. When the
Center obtained copies of contracts, it became clear that at least
some departments calculated the total cost of a contract by tallying
all its option years.
In other instances, contract lists provided by the agencies did not
correspond with information on the agencies' Web sites or with public
announcements by companies receiving the contracts. Often, the agency
was at a loss to explain these discrepancies. In addition, when asked
for copies of contracts which USAID told the Center it had awarded,
agency officials responded that it would take an indeterminate amount
of time to produce some of them because they would have to be
retrieved from global field offices.
Even when FOIA requests were granted, key information about
government contracts often was redacted, or blacked out. For example,
the Pentagon provided the Center copies of seven contracts awarded to
Science Applications International Corporation for work in Iraq. The
total contract value was omitted, although some unit pricingtypically
redacted under a rule that gives companies a right to oppose FOIA
requests about their government contractswas left in. That same rule
was cited by one Pentagon FOIA officer as justification why the
department was not releasing a Raytheon Aerospace contract worth more
than $7 million. Raytheon Aerospace, along with its affiliated
companies, was the 11thranked government contractor among companies
with contracts in Iraq and Afghanistan, earning $2.7 billion since
1990, according to the Center's analysis.
SAIC officials refused to discuss their contracts with the Center,
directing all calls to the Pentagon press office, which did not
answer Center queries. However, a congressional source, speaking on
condition of anonymity, told the Center that one SAIC media contract
in Iraq likely would be worth more than $50 million by the end of
2003. The total value of SAIC's contracts could not be determined.
Since February 2003, SAICthe country's largest employee-owned
research and engineering companyhas been in charge of the Iraqi
Reconstruction and Development Council, a Pentagon-sanctioned group
of Iraqis that is effectively functioning as the country's temporary
government. The senior members of IRDC hold positions at each of 23
Iraqi ministries, where they work closely with U.S. and British
officials, including L. Paul Bremer, head of the Coalition
Provisional Authority. The Council's official task is to rebuild the
structures of a government that are expected eventually to be handed
over to the new Iraqi authority. Members of the IRDC are officially
employed by SAIC, according to the contracts.
SAIC has also been hired to rebuild Iraq's mass media, including
television stations, radio stations and newspapers. SAIC, which is
not generally known for its media expertise, runs the "Voice of the
New Iraq," the radio station established in April 2003 at Umm Qasr
with U.S. government funds.
Revolving doors
In many ways, SAIC is typical of the kinds of American contractors
working in Iraq and Afghanistan. Among companies with contracts in
the two countries, SAIC was the third-largest recipient of U.S.
government contracts over the last 12 years; the company, its
employees and PAC contributed $4.7 million to national political
campaigns, the Center's investigation found.
SAIC's largest customer is the U.S. government, which accounts for 69
percent of its business, and its company roster is a revolving door
of government-corporate influences.
David Kay, the former U.N. weapons inspector who was hired by the CIA
to track down weapons of mass destruction in Iraq, is a former vice
president of SAIC. Kay left SAIC, where he oversaw homeland security
and counterterrorism work, in October 2002.
Christopher "Ryan" Henry left SAIC, where he was vice president for
strategic assessment and development, in February 2003 to become
principal deputy undersecretary of defense for policy. Henry now
works for the office overseeing his former employer, directly under
Douglas J. Feith, the undersecretary of defense for policy who has
been deeply involved in postwar planning.
SAIC's Executive Vice President for Federal Business and Director
Duane P. Andrews served as assistant defense secretary from 1989 to
1993, when he joined SAIC. Board member W.A. Downing served as deputy
assistant director for international counter-terrorism initiatives on
the National Security Council and joined SAIC after retiring as an
Army general in 1996. Bobby Ray Inman, a board member until October
2003, is a retired U.S. Navy admiral who once directed the National
Security Agency and served as deputy director of central
intelligence. Inman is also a member of the board of directors of
Fluor, another contractor in Iraq and Afghanistan.
Chemonics International, which according to information provided by
USAID's FOIA office holds the third-richest contract of all American
companies in Iraq and Afghanistan, offers another interesting
case-in-point. Founded by a former State Department foreign service
officer, the company receives 90 percent of its business from USAID.
Scott Spangler, the company's principal owner with 52 percent of the
company's stock, was a senior USAID official during the first Bush
administration. While at USAID, Spangler served as assistant
administrator for the Africa Bureau, associate administrator for
operations and acting administrator. Spangler became principal owner
of Chemonics in March 1999 and chaired the board until April 2002.
His wife, Jean Spangler, is also on Chemonics' board of directors.
Together, the Spanglers have contributed $98,460 to Republican Party
causes since 1990, according to the Center's campaign finance records
analysis.
Perini Corporation, working in Iraq and Afghanistan on contracts
worth up to $525 million, is owned by a group of investors that
includes Richard Blum, husband of Sen. Dianne Feinstein, a Democrat
from California who serves on the Appropriations Committee and the
Select Committee on Intelligence.
Sullivan Haave Associates Inc.identified by the Pentagon as a
contractor, though the company says it was a subcontractor to SAICwas
founded by Carol A. Haave, currently the deputy assistant secretary
of defense for security and information operations.
Another contractor with interesting ties is the Center for
Afghanistan Studies at the University of Nebraska, Omaha, which was
established in 1972 and claims to be the only institutional base in
the United States exclusively concerned with Afghan affairs. The
center's director, Thomas E. Gouttierre, is an old friend of Zalmay
Khalilzad, President's Bush's nominee as ambassador to Afghanistan
and a former paid adviser to Unocal. The oil company, which until
1998 was working on a plan to construct trans-Afghan natural gas and
oil pipelines, has funded the CAS' work in Afghanistan and hosted
members of the Taliban on visits to the United States. The CAS also
reportedly has longstanding ties to Washington policymakers and,
especially, the intelligence community.
In January 2002, USAID awarded the Center for Afghanistan Studies
$6.5 million to provide books and training for Afghanistan's interim
government to resume schooling. However, critics charged that the
books, written in the 1980s, contained Islamic material and verses
from the Koran in violation of the U.S. Constitution's separation of
church and state. That followed earlier criticism of the CAS' ties to
members of the Taliban leadership during its previous U.S. government
contracts.
In January 2003, the CAS, which had been involved in Afghanistan
education projects since 1973, lost the USAID contract for Afghan
educational textbooks and teacher training to Creative Associates
International Inc., a private for-profit aid company based in
Washington, D.C. Though the CAS did not get a new contract, it
received a no-cost extension of its 2002 contract from USAID to
continue training teachers from its office in Afghanistan.
Raheem Yaseer, the CAS assistant director and a former Kabul
University professor, said efficiency and quality were secondary to
politics in the process of selecting companies and organizations to
work in Afghanistan.
"It depends on who knows who in the administration, USAID and the
State Department," Yaseer said in an interview. "Universities try
their best to recruit professionals, but these Belt[way] bandits just
grab anybody that comes in handy."
In addition to its USAID contract for educational reform in
Afghanistan, worth at least $60 million, Creative was awarded a USAID
contract in March 2003 for educational development work in Iraq. That
contract, which may be extended by two years, is meant to cover
everything from desks and blackboards to textbooks, curriculum
reform, academic standards and teacher training and is worth up to
$157 million. Creative was the 11th largest recipient of
government-funded contracts in Iraq and Afghanistan, according to the
Center's analysis.
Four months before the Iraq contract was awarded, USAID hosted a
roundtable discussion of Iraq's educational system, which a Creative
representative attended. It was the only company later invited to bid
on the contract present at that meeting. Although Creative refused to
answer Center questions about the meeting, USAID identified its
representative as Frank Dall and said he was invited not on behalf of
the company but because he was "literally the only available
education authority to have worked directly with the Saddam regime."
USAID noted Dall's previous work in the Middle East with UNICEF and
UNESCO, but did not mention that Dall was a former USAID employee,
having served as the agency's education director for the Middle East.
USAID's comments came in response to an internal inspector general
report, commissioned after questions arose about possible impropriety
surrounding Creative's selection as a contractor in Iraq. The other
companies invited to bid were given only two weeks notice to submit
their bids.
"The documentation is clear that only one of the five contractors
that were subsequently invited by USAID to bid on the contract
participated in an initial roundtable discussion," a June 2003 USAID
memorandum detailing the IG's findings said. "In addition, we
conclude that USAID Bureau officials did not adhere to the guidance
on practical steps to avoid organizational conflicts of interest."
Another onetime senior USAID official is also on the Creative staff.
In July 2002, the agency's former chief of staff Richard L. McCall
Jr. was selected to direct Creative's Communities in Transition
division. Before joining USAID, McCall was a senior policy adviser to
the deputy secretary of state and spent many years working on Capitol
Hill, including as a staffer for the Senate Foreign Relations
Committee and the Senate Democratic Policy Committee. Close ties
The Center's investigation also found that many contractors had close
working relationships with one another. For example:
* Creative International subcontracted three of the four other
companies that were invited to bid on the USAID contract in Iraq,
including Research Triangle Institute and DevTech Systems Inc.
Creative is also a subcontractor to Research Triangle Institute on
RTI's Iraq contract. * In addition to its Afghanistan contracts,
Chemonics is a subcontractor in Iraq to Research Triangle Institute
and BearingPoint, which also has a contract in Afghanistan. * Vinnell
Corporationwhich became the first American private military company
in 1975 with its contract to train the Saudi National Guardis using
SAIC and Military Professional Resources Inc. to help train the New
Iraqi Army. SAIC and MPRI separately also have contracts in Iraq.
The Center did not examine subcontractors in any systematic way, and
it was not clear how much of the reconstruction business they held.
USAID Administrator Andrew Natsios has said that more than 50 percent
of the money that goes to contractors actually ends up with
subcontractors.
In addition to contracts awarded by the three departments that were a
focus of the Center for Public Integrity's investigation, a handful
of other major American companies won contracts for work in Iraq,
including ChevronTexaco, JPMorgan and MCI/WorldCom.
ChevronTexaco, a major U.S. government contractor and political party
donor, joined five other international oil companies selected by the
Iraqi State Oil Marketing Organization to market Iraqi oil. The
expected revenue of $300 million from the sale of oil will be
controlled by the U.S. government for use in rebuilding Iraq.
Including Chevron, there were only two contracts for oil-related work
among the dozens reviewed by the Center.
JPMorgan, the nation's second-largest bank, which was implicated in
the Enron scandal, has been contracted by the Coalition Provisional
Authority to run a consortium of 13 banks from 13 countries that will
constitute the Trade Bank of Iraq. Bank consortium members are not
expected to earn much revenue initially, but banking publications
report the real windfalls will come once Iraq's oil production
resumes full capacity and anticipated billions of dollars flow
through the Trade Bank for financing large development projects.
MCI, formerly WorldCom, was hired by the Pentagon to build a wireless
phone network for officials and aid workers in the Baghdad area.
MCI's reconstruction activities in Iraq were not disclosed in
documents the Defense Department provided to the Center under a
Freedom of Information Act request. However, an MCI spokesperson said
the Pentagon-led Coalition Provisional Authority awarded the contract
to MCI in late May 2003. The contract was part of a short-term
communications plan costing the Pentagon approximately $45 million.
The MCI spokesperson would say only that the company's contract
amounted to less than $20 million. When it was still named WorldCom,
the company paid a $500 million fine to the Securities and Exchange
Commission for overstating its cash flow by nearly $4 billion, and it
was temporarily banned from receiving federal contracts.
Seeking oversight
In April 2003, the General Accounting Office, the investigative arm
of Congress, announced it would launch a broad investigation into
methods used to award contracts to rebuild Iraq. The awarding of
no-bid or closed-bid contracts in Iraq to Halliburton and Bechtel
prompted the calls for investigation, although, as the Center
investigation found, a majority of contractors in Iraq and
Afghanistan have significant government ties.
"There is growing evidence that favored contractors like Halliburton
and Bechtel are getting sweetheart deals that are costing the
taxpayer a bundle but delivering scant results," said Rep. Henry
Waxman, a California Democrat and the administration's most vocal
critic on the contracting process.
Vice President Dick Cheney is a former defense secretary and former
CEO of Halliburton and still receives deferred compensation from the
company. Bechtel's ranks of executives and board members include
former Secretary of State George Shultz, former State Department
official Charles Redman and former Marine four-star Gen. Jack
Sheehan, who served as NATO's Supreme Allied Commander for the
Atlantic before his retirement in 1997 and now sits on the Defense
Policy Board, a Pentagon-appointed body that advises on defense
issues.
GAO sources told the Center that the agency is conducting two
separate probes of contracts awarded for work in Iraq and
Afghanistan. The first covers all civilian contracts for Iraq
reconstruction involving appropriated funds and stemmed from requests
by two Democratic congressmen, who complained of cronyism in the
contracting process. That report is expected to be completed in late
2003 or early 2004. A second probe involves a handful of
multibillion-dollar, multiyear military contracts that cover work in
both countries. The primary focus of that probe will be the Army's
LOGCAP (Logistics Civil Augmentation Program) contract held by
Kellogg, Brown & Root and one held by Johnson Controls Co., which
created Readiness Management Support LC to manage AFCAP, the Air
Force Contract Augmentation Program. GAO officials estimate the
second probe will take about a year to complete.
Many of the companies initially selected for work in Iraq and
Afghanistan were awarded contracts because they had the necessary
security clearance or established contracting reputations with the
government departments and agencies assigning the work, officials
have said. But U.S. lawmakers have been pressing for a more
transparent process in the next round of reconstruction contract
awards.
Waxman, in an Oct. 15 statement, said "the root cause of these
problems is the administration's insistence on virtually absolute
secrecy about how it is spending the taxpayer's money."
Acknowledging a lack of general oversight in the previous contracting
process, the government has announced that it will consolidate all
future contracts under a new Baghdad-based office as of November. The
office is to be set up under the Coalition Provisional Authority and
headed by a retired U.S. Navy admiral, David Nash, reporting directly
to CPA head L. Paul Bremer.
"Now the whole contracting procedure is confusing," John Shaw, deputy
undersecretary of defense for international security, told a London
conference in mid-October, where he announced the new office.
"There's been many complaints. This new procedure we hope is going to
bring greater accountability and transparency."
Kevin Baron, Maud Beelman, Neil Gordon, Laura Peterson, Aron
Pilhofer, Daniel Politi, Andr Verly, Bob Williams and Brooke Williams
contributed to this report, which was written by Ms. Beelman,
Director of the International Consortium of Investigative Journalists
at the Center for Public Integrity.
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