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Watchdog Finds Many Iraq Reconstruction Projects Subpar

November 15, 2006 at 2:50 PM EDT

JEFFREY KAYE, Reporter, KCET: Amid pomp and circumstance, hundreds of cadets graduated this summer from the newly rebuilt Baghdad Police Academy. The $73 million project was supposed to be a showpiece of America’s Iraq reconstruction program. But to critics, it’s an icon of incompetence; to others, it shows the challenge of rebuilding in a war zone.

Pictures taken by investigators two months after the graduation showed human waste dripping from ceilings in the eight dormitories. One leaky room was nicknamed the “rain forest.” The photos and descriptions are contained in a report issues by the special inspector general for Iraq reconstruction, Stuart Bowen, Jr.

STUART BOWEN, JR., Special Inspector General for Iraq Reconstruction: Sewage just drains through the floors, through the light fixtures, through the ceiling, fundamentally compromising the structure of the buildings and creating really a disastrous situation, an unusable facility.

JEFFREY KAYE: Bowen calls the Baghdad Police Academy the worst project he’s seen since taking office in January 2004.

STUART BOWEN, JR.: We found that the plumbing was simply improperly installed in all eight barracks, so poorly that, when the facilities were used, that the plumbing burst.

JEFFREY KAYE: The company responsible for the Baghdad Police Academy is Parsons Corporation, the global engineering and construction giant headquartered in Pasadena, California.

JAMES MCNULTY, CEO, Parsons Corporation: The dormitories where the plumbing failures occurred is certainly regrettable, and it’s not up to our standards.

JEFFREY KAYE: James McNulty, Parsons’ chairman and chief executive officer, blames Iraqi subcontractors for the problems at the police academy.

JAMES MCNULTY: When we found out about the difficulties, we sent in the Iraqi plumbing contractor who did the work, and they have repaired the facility under the warning terms of their contract, at no cost to the government or to the Iraqis.

Cancelled projects

Stuart Bowen, Jr.
Special Inspector General
It was very disappointing, most disappointing project I've visited.

JEFFREY KAYE: But the inspector general's office expects there will be additional costs to fix up the academy. That's just one of the many controversies enveloping Bowen as chief watchdog of America's $22 billion Iraq rebuilding program. Bowen is a former lawyer for George Bush in both Texas and Washington. His office has produced a stream of audits and reports highly critical of the Iraq reconstruction program.

SEN. SUSAN COLLINS (R), Maine: Welcome back home.

STUART BOWEN, JR.: Thank you.

JEFFREY KAYE: As inspector general, Bowen has spent a total of 15 months in Iraq. After a recent trip, Bowen briefed GOP Senator Susan Collins of Maine.

STUART BOWEN, JR.: It was very disappointing, most disappointing project I've visited.

SEN. SUSAN COLLINS: Was that in a Parsons project?

STUART BOWEN, JR.: Yes, it was.

JEFFREY KAYE: Bowen's inspectors examined 14 of Parsons' Iraq projects, and Bowen says all but one were substandard.

STUART BOWEN, JR.: Thirteen of them did not meet contract expectations. And the one that did, a prison which I visited last spring, was ultimately canceled because it was over budget and significantly reduced in scope.

JEFFREY KAYE: In fact, the U.S. government canceled two Parsons prison contracts worth more than $100 million.

With hundreds of projects worth $1.7 billion, Parsons has assumed a lion-sized role in the Iraq rebuilding program. It's worked on oil operations, schools, water systems, munitions disposal, and one of the most photographed buildings in recent Iraq history, the courthouse where Saddam Hussein has stood trial.

In other Parsons projects, health care facilities, border posts, and police stations, the inspector general cataloged contractor horror stories: posts that weren't straight, walls with cracks and gaps, and poor concrete work that made structures unsafe.

Parsons was supposed to renovate 20 hospitals but completed just 12. Among them was the Diwaniya Maternity and Pediatric Hospital, 100 miles south of Baghdad. In January, Iraqi physician Ali Fadhil filmed at the hospital for a British documentary.

DR. ALI FADHIL, Iraqi Physician: Everywhere the standard of work is terrible. New light fittings have melted. Pipes have not been connected. In the operating theater changing room, you can smell raw sewage.

Health care crisis

James McNulty
CEO, Parsons Corporation
Our contract was to renovate the hospital, which we did, and we turned over to our government, and the Iraqis accepted it. What happens after acceptance is beyond our control.

JEFFREY KAYE: Parsons received nearly $4.2 million to renovate this hospital, but instead of new equipment, Fadhil found old incubators held together with wires and tape, oxygen tubes that weren't properly connected, and leaky plumbing. With the help of Fadhil, who now lives in New York City, we contacted the hospital administrator. He says the problems have worsened in the last 10 months.

DR. ALI FADHIL: Now we have the operation -- the cesarean operation room and the neonatal room, it's closed right now because of sewage.

JAMES MCNULTY: Our contract was to renovate the hospital, which we did, and we turned over to our government, and the Iraqis accepted it. What happens after acceptance is beyond our control.

JEFFREY KAYE: Other Parsons work included the planned construction of clinics throughout Iraq, but that contract was scaled back from 141 to 20, and of that only seven have been completed.

STUART BOWEN, JR.: The program, which was the key to providing real health care in Iraq, simply fell off the rails. Parsons, the contractor, didn't get the job done.


James McNulty
CEO, Parsons Corporation
We've had our Iraqi employees pulled out of cars and shot point-blank. We've had Iraqis that worked for us kidnapped. We have had truck drivers blown up by explosive devices while they've been driving down roads.

JEFFREY KAYE: McNulty says three factors are responsible for Parsons' difficulties: unreasonable U.S. government expectations; problems with Iraqi subcontractors; and, most of all, unexpected levels of chaos and violence.

JAMES MCNULTY: We had no idea going in that it would be this dangerous. All of the preliminary contractual discussions that we had during the bidding process, we were told to assume a, quote, "permissive environment," by that meaning that we would be able to freely travel around the country and be able to provide the necessary and appropriate oversight at all of the sites. And it certainly didn't turn out that way at all.

JEFFREY KAYE: McNulty says the challenges in Iraq construction are like nothing Parsons has experienced in its 62-year history.

JAMES MCNULTY: We have had senior Iraqi contractor representatives on site murdered. We've had our Iraqi employees pulled out of cars and shot point-blank. We've had Iraqis that worked for us kidnapped. We have had truck drivers blown up by explosive devices while they've been driving down roads.

JEFFREY KAYE: But the difficulties of building in a war zone did seem apparent from the beginning. By early 2004, when Parsons signed its first reconstruction agreements, more than two dozen civilians working for private contractors had already been killed in Iraq.

PARSONS MANAGER: Our project managers are prudent enough to know that, if the coalition forces say it's not safe, it's not safe.

JEFFREY KAYE: And by June 2004, when we first visited Parsons for a story about Iraq reconstruction, company executives assured themselves and us they could handle the dangers.

JAMES MCNULTY: We feel very comfortable doing this work, and we think we can manage the risks. I mean, if we didn't think we could manage both the physical risks and the financial risks, we would have chosen not to bid.

JEFFREY KAYE: Looking back on that statement, were you being realistic?

JAMES MCNULTY: At the time, I was being realistic because I didn't think that the security situation would deteriorate to the extent that it did.

JEFFREY KAYE: The war also affects the watchdogs. Concerned for their safety, analysts with the inspector general's office often examined satellite images instead of visiting projects in person.

The violence has also made oversight work difficult for the U.S. Army Corps of Engineers, which manages the Iraq reconstruction work and inspects projects.

But, says Major General William McCoy, the former commander of the Corps in Iraq, the war is not the only reason for Parsons' difficulties. McCoy, who spent 15 months in Iraq, until mid-October, made the decisions to terminate Parsons' prisons and health facilities contracts.

MAJ. GEN. WILLIAM MCCOY, U.S. Army Corps of Engineers: Their ability to get out and go and see stuff and get to a place was severely limited, partially because of their belief in the security situation, and partially because they just didn't have enough people to get to the right places at the right time.


Rep. Henry Waxman
(D) California
I don't think anybody ought to get paid and be able to keep the money if they didn't do what they were supposed to do.

JEFFREY KAYE: The Army Corps found that Parsons also lost control of projects because of its heavy use of subcontractors, Iraqi companies, which in turn farmed out work to other layers of subcontractors. McNulty says the U.S. government required Parsons to use Iraqi firms, but Parsons had difficulty finding companies with expertise.

JAMES MCNULTY: The Iraqi contractors had never built anything to U.S. standards before. In fact, many of the Iraqi contractors were never in business until after the war. And so we were supervising Iraqi contractors and trying to get them to build to U.S. standards when they had never done so before and had no experience doing that.

JEFFREY KAYE: McNulty complains the U.S. government didn't pay what Parsons needed to hire enough supervisors. To make matters worse, he says, after Parsons agreed to build 141 clinics in two years, the Army Corps of Engineers decided Parsons should do the job in half the time.

JAMES MCNULTY: The government then told us that 24 months was unacceptable, we had to build them in 12 months, and that they wanted to start every one of the clinics simultaneously, 141 clinics all over Iraq at 141 different sites.

MAJ. GEN. WILLIAM MCCOY: There was clearly some issues with some of the decisions the government made. But at the end, they signed the contract to accomplish the tasks that we asked them to do.

JEFFREY KAYE: Democratic Congressman Henry Waxman agrees. He says Parsons promised more than they could deliver.

REP. HENRY WAXMAN (D), California: The contractors didn't think there would be a problem when they were willing to sign the contracts. They even added money into the contracts to provide for security protections for their efforts and for their workers.

JEFFREY KAYE: Waxman, who is expected to chair the House Government Reform Committee next year when Democrats take control of Congress, promises to pursue allegations of war profiteering.

REP. HENRY WAXMAN: I don't think anybody ought to get paid and be able to keep the money if they didn't do what they were supposed to do. And then they found that Iraqi subcontractors didn't do the work, but why should the U.S. taxpayers pay for that? We should get our money back.

JEFFREY KAYE: But Parsons' chief says the company made an honest profit of 2 percent to 3 percent and has no intention of repaying it.

JAMES MCNULTY: There is nothing wrong with our firm having made a profit on that work that we did over there in Iraq. It was legitimately earned; it was honestly earned. And none of our employees, nor our firm, should feel the least bit bad about that.

JEFFREY KAYE: Congress recently voted to disband the inspector general's office next October, but that decision is expected to be reversed. And Stuart Bowen says he'll expand his investigation of Parsons as part of a widening probe of how U.S. funds have been used in Iraq.