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Report Finds Fraud, Waste by War Contractors Costs Billions

September 1, 2011 at 12:00 AM EDT
After a three-year investigation, a congressionally mandated commission found this week that between $31 billion and $60 billion has been misspent in the wars in Iraq and Afghanistan. Margaret Warner discusses the findings with one of the commissioners, Dov Zakheim.
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MARGARET WARNER: Now, waste, fraud and abuse of taxpayer money during a decade of war in Afghanistan and Iraq.

After a three-year investigation, a Congressionally mandated commission yesterday issued a blunt finding, that between $31 billion and $60 billion has been misspent on the two wars. That’s up to one-quarter of the entire $206 billion outsourced to private contractors for everything from security to food preparation to reconstruction projects.

The last 10 years have brought more than 260,000 such contractors to work in war zones, where they sometimes outnumbered soldiers. The panel urged quick action on 15 recommendations to tighten controls.

And for more on all of this, we turn to Dov Zakheim, one of the commissioners. He was the Defense Department’s comptroller from 2001 to 2004, at the onset of both wars.

And Mr. Zakheim, thank you for joining us.

This was a pretty stunning finding on your part. I mean, up to one out of every $4 spent on contractors was misspent. First of all, give us a flavor. What are you talking about?

DOV ZAKHEIM, Commission on Wartime Contracting: Well, out of that $60 billion, about $40 billion is what you call waste. Again, that’s an estimate that ranged from about $20 billion to about $40 billion.

And waste is simply money that you spend that you needn’t have spent. For example, a road in Afghanistan that should have cost about $85 million wound up costing over $170 million. We were paying workers in Iraq, contractors, for a full day’s work, when in fact they were working 15 percent of the time. That’s simply waste.

It’s no different from hiring a contractor to fix your house, getting overcharged and paying for it. The rest of the $60 billion, about anywhere between $10 billion and $20 billion, depending on whether it’s a $30 billion or $60 billion estimate, the rest of that is pure fraud, criminal fraud, people making off with money that they shouldn’t.

That’s how we got to the numbers.

MARGARET WARNER: And that might be either the contractor getting paid for something he didn’t do or, what, extortion over in Afghanistan or Iraq?

DOV ZAKHEIM: Well, in Afghanistan, clearly, that’s the case.

When I was over there, together with one of my fellow commissioners, we were handed a copy of a bill, an invoice, that was charged to a contractor and was issued by an outfit that called itself the Islamic Republic of East Afghanistan. We have reprinted it in our report. It has a phone number to call: If you want to be safe, call this number.

We’re paying people to kill our kids.

MARGARET WARNER: Now, how — you were at the Defense Department. How was this allowed to happen?

DOV ZAKHEIM: Well, in Afghanistan, the basic problem was that, for the first couple of years or so, we really didn’t put very much money in at all. So we didn’t have that kind of a problem.

When we then went into Iraq, because it was so hurried, we drew up contracts that were not specified the way a contract normally is. It’s understandable. It was the beginning of a war. What then happened is that we didn’t have enough people to monitor, to supervise, to oversee what was going on, to fix the contracts up.

And that was due in part to the fact that many of the acquisition professionals and contracting professionals had been let go in the 1990s. So you had, in effect, the perfect storm, not enough people, because they had been let go in the ’90s, and too many contracts for too much money, not provided in a specific way in the beginning of the Iraq war.

And that continued because, again, we just didn’t have the people to monitor the contracts, to let them properly, to force competition. And, of course, with all of that, you lose money.

MARGARET WARNER: But, I mean, in the huge Defense Department budget, that’s certainly a question of what priorities were set. I mean, the Pentagon doesn’t lack for personnel.

DOV ZAKHEIM: Well, it doesn’t lack for personnel, but you have to have the right personnel.

And one of our major recommendations is that the leadership be really focused on this issue. You just heard about Libya. Rob Malley was talking just a minute ago about how there’s going to be a need to reconstruct Libya. That country has money. But we have got the possibility of going into other countries. We have been fighting what are called contingencies pretty much on an annual basis for more than the last two decades.

And if we don’t have the experts, if we don’t train them, if our leadership is not focused on them, then we’re going to make the same mistakes over and over again. And our commission, which, by the way, was bipartisan — actually, nonpartisan — we all agreed on every recommendation.

We believe that unless there is top-level focus on this, unless the culture is changed, unless commanders recognize how important it is, that contractors are just as much a part of their force as the people wearing uniforms — and oh, by the way, thousands of contractors have been killed, and they don’t get ceremonies at Dover Air Force Base — unless there’s a focus on contracting in a proper way, we’re going to make the same mistakes, waste the same money. And the debt crisis shows us that we don’t have the money to waste.

MARGARET WARNER: Could that problem even be exasperated as the U.S. draws its troops down from Iraq in the next couple of years, or three years, Afghanistan, and, say, State Department or AID become even more dependent on private contractors for security, for example?

DOV ZAKHEIM: Absolutely.

In fact, there are two ways that the problem is getting worse. One is the challenge of starting projects that the either the Iraqi government or the Afghan government cannot sustain. We built a power plant — excuse me — a water treatment plant in Iraq that has intermittent power and that is not being used.

We built a prison that is not being used. The Iraqis don’t want it. We have built schools in Afghanistan without teachers; health clinics, over 130 of them, in Iraq without the proper equipment and supplies. So you have got the problem that we’re building stuff that won’t be maintained.

And, at the same time, if you rely on security contractors in places where there’s corruption, where there’s danger, where maybe the contractors themselves are a danger, then you have got a problem as well. And we have recommended that, instead of simply focusing on the narrow issue of whether this is something government can or cannot do, you focus on the risk involved. Then we will clearly identify places where we just shouldn’t have contractors.

MARGARET WARNER: Now, some of your recommendations, first of all, require congressional action and require spending more money, hiring more people, as you’re saying, or an I.G., an inspector general, for all wartime contracting, at a time of budget austerity, do you think Congress is going to go for that?

DOV ZAKHEIM: I believe so.

We’re not talking about big bucks here. When you look at waste that amounts to over $40 billion, or could, and fraud that amounts to as much as $20 billion, then to spend the kind of money we’re talking about for a relatively small number of people, you would only get more of them once a contingency started.

But you would have a core that would watch over those who are contracting out and managing to ensure that we don’t make the same mistakes again. We’re talking about millions, and not billions. This is a penny wisely spent, and we’d be pound-foolish if we didn’t spend it.

MARGARET WARNER: Well, Dov Zakheim of the Commission on Wartime Contracting, thanks so much.

DOV ZAKHEIM: Thank you for having me.