Accountable Strategies blog

A blog about accountability issues in the public, private, and nonprofit sectors

Posts Tagged ‘Iraq reconstruction’

New book cites government downsizing as cause of Big Dig, other problems

Posted by David Kassel on April 7, 2010

High costs and quality problems on public projects, from the Big Dig in Boston to the American reconstruction of Iraq’s infrastructure, are a direct result of government downsizing and related issues, including inadequate planning.

 That’s the key message of my new book, Managing Public Sector Projects: A Strategic Framework for Success in an Era of Downsized Government, which has just been published by CRC Press.

The book discusses a recurring pattern of reductions in public-sector managerial staffing since the 1980s and an increased reliance on contractors for project management.  

If you look closely at the Big Dig and at many of the Iraq reconstruction projects, you see an over-reliance on contractors for basic management functions that the government itself used to do.  Among the results are unclear lines of authority, lowered accountability, inequitable allocation of risk, higher costs, and poorer quality. 

The book points out that that the Big Dig, in particular, suffered from a range of managerial issues common to public projects in which key managerial functions have been privatized.  For instance, the state of Massachusetts relied on Bechtel/Parsons Brinckerhoff, the private-sector design and construction manager of the Big Dig, to undertake much of the project’s preliminary and even some final design work, oversee construction contracts, and supervise its own work.   Similarly, in Iraq, the U.S. Agency for International Development used the Bechtel Corp. both as a project manager and primary contractor.  Accountability and cost issues resulted in both instances. 

The  book also discusses quality problems on the Big Dig, in Iraq, and in many other public projects that have resulted from a desire to meet schedule goals without undertaking proper planning or adhering to what have often been traditional internal control practices.  The Big Dig, for instance, was plagued by a practice of proceeding with incomplete and inaccurate designs in an attempt to avoid schedule delays.   

Similarly, in Iraq, one cost-plus contract with Kellogg Brown and Root (KBR) contained more than $200 million in questionable costs because task orders and specifications were not even negotiated until six months after construction began on projects to restore Iraq’s oil infrastructure. 

The book discusses a number of successful public projects as well, such as the development of a new information technology system in the City of Seattle and the recent construction of a new public library in the Town of Harvard, Massachusetts, which were completed on time and within budget.  While the projects discussed in the book vary widely in scope and cost and were undertaken at all levels of government, my intent was to distill management practices that are common to successful projects as well as to projects that are problematic or unsuccessful.

The purpose of the book isn’t to assign blame, but rather to give public managers new tools to cope with downsized staffs and related problems and to bring their projects to successful conclusions.

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Why hasn’t Halliburton come up more in the presidential campaign?

Posted by David Kassel on October 28, 2008

John McCain has repeatedly sought to portray Barack Obama as a proponent of earmark and pork barrel spending, using the famous and inaccurate $3 million overhead projector example in the debates.

It would have been nice had Obama hit back on McCain’s apparently extensive ties to U.S. military contractors in Iraq.   Now, there’s some real pork to talk about.

A 2005 report by the Congressional Committee on Government Reform stated that government auditors had found that “questioned and unsupported” costs by Halliburton alone exceeded $1.4 billion under just two Iraq reconstruction contracts.  As of 2007, there was more than $10 billion in questioned and unsupported costs relating to Iraq reconstruction and troop support contracts, according to a Government Reform Committee hearing transcript. 

The McCainSource blog, by the way, details McCain’s ties to military contractors, noting that the top 10 defense contractors alone funneled $216,259 in political contributions to him.  And McCain’s top advisers and fundraisers have been paid millions of dollars to lobby the Pentagon, the White House and Members of Congress.  As The McCain Source blog noted, McCain opposed several measures to hold contractors accountable, including this vote to create a Senate committee to investigate contractor payments in Iraq and Afghanistan.

Yet, Obama has made little mention on the campaign trail of the lack of oversight of contractors and the resulting drain of U.S. resources in contracts with them. The history in Iraq of Halliburton alone could have been a major campaign issue.

The Government Reform Committee report noted that Halliburton had three multi-billion dollar contracts in Iraq. One of them, a sole-source contract, was awarded in secret in March 2003 to Halliburton’s subsidiary, Kellogg Brown and Root.  The Government Accountability Office reported that the Defense Department paid more than $220 million in “questioned” costs under it.

According to the Committee, all three of Halliburton’s major contracts in Iraq have been “cost plus award fee,” or “cost-plus,” meaning that Halliburton is reimbursed for costs it incurs under the contracts and then receives its profit, or fee, as a percentage of those costs.

The Committee report stated that former Halliburton employees have provided information to Congress that the company charged $45 for cases of soda, billed $100 to clean 15-pound bags of laundry, and housed its executives at a five-star hotel in Kuwait.  Halliburton truck drivers have testified that the company “torched” brand new $85,000 trucks rather than perform relatively minor repairs and regular maintenance on them.  Halliburton procurement officials described the company’s motto in Iraq as “Don’t worry  about price. It’s cost-plus.”

Meanwhile, the Special Inspector General for Iraq Reconstruction reported that under another Iraq reconstruction contract, Halliburton-subsidiary KBR billed the government for $52 million in administrative costs during a nine-month period of inactivity, before it was issued a task order.

There’s clearly a lot of information out there from government sources about these examples of real pork.  It just isn’t getting talked about for some reason.

Posted in Corporate responsibility, Oversight, Private, Public | Tagged: , , | 1 Comment »

How not to undertake a public project

Posted by David Kassel on July 14, 2008

(Part 2 in a comparison of public projects)

In the previous post on this site, I described a successful project to design and construct a new public library in my hometown of Harvard, Massachusetts.  It’s interesting to compare some of the key managerial decisions and actions in that case with a public construction project in Iraq.

Clearly, the construction of the Basrah Children’s Hospital in Iraq, now three years behind schedule, is being done under much more difficult conditions than was the Harvard town library.  Yet, many of the basic management decisions involved in these two public projects are the same.  The Basrah Children’s Hospital project in Iraq is an example of a public project beset by managerial problems, and in many ways it seems to symbolize the overall U.S.-led reconstruction effort in Iraq.

In August 2004, the U.S. Agency for International Development issued a job order to Bechtel National, Inc. to construct the 50-bed pediatric facility in the city of Basrah. The construction of the hospital was to be part of the overall U.S.-led effort to rebuild the Iraqi infrastructure following the invasion of the country in 2003. Congress authorized $50 million in funding for the hospital project, which was intended to improve the quality of care and life expectancy for women and children in that war-torn country. 

The hospital project was apparently one of some 20 projects being undertaken by USAID under a single $1.4 billion contract with Bechtel.

The scope of work was expanded in July 2005 to increase the number of beds to 94 and to upgrade the faciity to be an oncology center, according to a 2006 report by the Special Inspector General for Iraq Reconstruction.  The schedule and projected cost of the project, however, remained the same.  The hospital was projected to be complete as of December 2005.

According to a July 2006 report by the Special Inspector General, USAID’s accounting systems and processes were inadequate, and the agency failed to identify and report project costs to the U.S. Chief of Mission in Iraq and to Congress.  The Special IG noted that the completion date of the hospital had slipped by nearly 270 days as of March 2006, and the projected construction cost had risen to between $150 and $170 million.

Corner view of the Basrah Children\'s Hospital. March 2008, from SIGIR April 2008 quarterly report

Corner view of Basrah Children's Hospital, March 2008 (SIGIR)

 Here are some highlights from the Special IG’s report on the construction of the hospital through July 2006:

  • USAID did not establish an appropriate program management structure for the hospital or for its other reconstruction projects.  The agency relied on one “administrative contracting officer” and one “cognizant technical officer” to manage the entire $1.4 billion in projects under contract with Bechtel, and never appointed a program manager with sole responsibility for the hospital project.
  • Even though Bechtel briefed USAID in March 2006 that the hospital project was 273 days behind schedule, USAID’s report to Congress the following month reported no problems with the project schedule.  In addition, the agency continued to report the project cost as $50 million, even though Bechtel was estimating the cost at $98 million by April 2006.
  • USAID did not include the installation of medical equipment in its cost estimate for the hospital.
  • A consultant to USAID recommended that the agency discontinue Bechtel as the prime contractor for the hospital project.  The consultant, Louis Berger Group, projected that discontinuing Bechtel would reduce costs by some $8 million, primarly from the reduction in contractor overhead.

In the wake of the Special IG’s report, the U.S. Mission in Iraq transferred the the hospital project from USAID to the U.S. Army Corps of Engineers.  In addition, the U.S. Mission ordered Bechtel to stop work on the project, at least until the Corps of Engineers could take over management.

As of now, the hospital is still not finished.  An April 2008 quarterly report by the Special IG listed the project as 85 percent complete.  The total cost of the project, now projected to be finished by February 2009, is pegged by the Special IG at $163.6 million–a roughly 227 percent increase over the original cost estimate.

To me, a key difference between the hospital project and the Harvard town library that jumps out is the level of involvement by public managers in each case.  It appears there was a higher actual number of public-sector managers overseeing the construction of the $7 million Harvard library than were overseeing the entire $1.4 billion USAID reconstruction effort in Iraq, including the $163.6 million Basrah Children’s Hospital.

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