Paying for the Peace in Iraq

CONGRESSIONAL OFFICIAL:

The conference report is adopted.

GWEN IFILL:

Congress agreed this week to sign off on an additional $87 billion to occupy and rebuild Iraq and Afghanistan. But billions of dollars have already been spent fixing oil pipelines, reopening schools, rewiring electricity and communications. But a new report from a government watchdog group suggests insider connections may have helped certain companies win contracts.

The report, entitled "Windfalls of War," finds $2.3 billion went to Halliburton Co.'s Kellogg, Brown and Root subsidiary to repair Iraq's oil industry. Vice President Cheney was once Halliburton's CEO, but says he has had nothing to do with the Iraq contracts.

More than $1 billion went to the Bechtel Group to rebuild electricity, water, and sewage and airport facilities. Bechtel has also given more than $3 million to Democratic and Republican campaigns, but says there is no connection. In fact, 53 companies listed in the report have made campaign contributions.

SPOKESMAN:

The president of the United States.

GWEN IFILL:

And President Bush received more contributions from these sources than any other politician has in the last dozen years. At the State Department, which administers some of the contracts, spokesman Richard Boucher defended the process.

RICHARD BOUCHER:

The bidding in Iraq was a competitive process. It was fully in accord with the regulations. The contract, for example, that Bechtel was awarded for capital construction had ten firms invited to bid. Seven firms actually submitted bids. Bechtel got the contract because they had the highest technical merit scores and the lowest cost, after an aggressive review by the career civil servants who handled this procurement matter.

GWEN IFILL:

But yesterday, just before Congress approved more money for Iraq, Sen. Byron Dorgan told a Democratic policy committee hearing there's no accountability for how the funds are doled out.

SEN. BYRON DORGAN:

There is very little here that gives me confidence that this money is going to be spent effectively. You know, this is going to be like the sound of hogs in the corncrib. When you see billions and billions and billions of dollars available for contracts, and it's "Katie, bar the door" on accountability, and companies are going to want to get their mitts into this and move over to Iraq and get money through their hands. And I think the taxpayers have the capability, the very likelihood of being fleeced here.

GWEN IFILL:

Democrats and Republicans in Congress have pressed for a more open contracting process and outside audits.

For more, we're joined by Charles Lewis. He's the founder and executive director of the Center for Public Integrity, a nonprofit investigative research organization based in Washington that authored that report. Joining him is retired Army Major Gen. Patrick Kelly. He was the commander of the effort to rebuild Kuwait's infrastructure after the first Gulf War. General Kelly, what is your overall reaction to the findings of this report?

MAJ. GEN. PATRICK KELLY:

Well, I was just made aware of it recently, and I will just give you a quick comment. From what I've seen, that the procurement especially by the Army Corps of Engineers which is the one I'm most familiar with, it looks like they are accomplishing their procurement very similar to what we did in Kuwait. In Kuwait we went in right after the war, we had an urgent situation, a compelling situation in which we had to have contractors in Kuwait ready to handle the infrastructure right away.

And you have to have limited procure not do that, you can't have an open and full procurement because it takes so long, usually six to nine months. So what happens is you identify companies that have the potential to do the scope of work you want, that can mobilize quickly, and that can have the talent, namely the personnel talent to go in and accomplish the work. And I think that's pretty much what happened, from what I can see, in Iraq as well.

GWEN IFILL:

Mr. Lewis, it sounds like what we're talking about is convenience, and finding the people who can do the job in the most, with the most alacrity, as quickly as possible. Is that what you also found as part of your research?

CHARLES LEWIS:

We should stop for a second. There was no listing anywhere in the U.S. government about who was getting contracts in these two countries. So our main job was to merely establish contacts, who's getting what, and how much. So we were not on the ground in either country trying to see who was there for five or ten years waiting to get a contract or how much expertise they had. But there are thousands of companies in the U.S., and there are lots of contractors who are very angry who have complained publicly not getting contracts.

In the last several months there's been controversy, as you know, around Halliburton since early this year when they had a sole source contract that could be as high as in the billions of dollars. One other company in particular came out from Texas and said that they couldn't get their phone calls returned. So I'm not at all persuaded that the only companies are the ones that got one and two billion dollars in contracts. I think that the biggest problem we found is we couldn't get a straight answer from anybody.

We had to do 73 Freedom of Information requests; we had 20 people calling all the time for six months. We need to be able to get information about our government more easily than. The average citizen is not going to be able to do that and not going to take the time to do that.

GWEN IFILL:

In addition to trying to get the information, you also concluded or at least you suggest in your public statements after the report was released that there was a quid pro quo at work here.

CHARLES LEWIS:

Well, I suggested that we noticed that there was millions of dollars flowing, all the folks that got contracts are political players, they spend millions of dollars on contributions and/or lobbying fees. And, you know, I can't prove a one to one correlation, I can't flatly state that this company got it because of the money. But I also think the public has a right to know that there is an attempt to influence government in the form of these payments, and that's why we listed that information on our Web site.

GWEN IFILL:

General Kelly, in your experience, is there an attempt to influence government by the way these contracts are let, by the way these contracts are solicited?

MAJ. GEN. PATRICK KELLY:

I can't speak for everybody. But I will tell you about my background — I was in the Army Corps of Engineers for 33 years, and the last 15 of which not only was I commander but I was a contracting officer. In that entire time I had no political influence rendered to me to point a contract in a certain direction. But let me just quickly cover two points that I think I would like to respond to Mr. Lewis. One is that at the end of a war, there is chaos, and there's an emergency situation in which you bring in a contractor as I said before who can mobilize, who has the talent, and can have the personnel there in a hurry.

In Kuwait, I remember when at that time Col. Lecursio, now Brig. Gen.-retired Lecursio moved into Kuwait, he was there three days after the war ended and he had four or five U.S. contractors that they had previously selected along with him to do the necessary tasks. Then what happens is, after a period when you have operations are stable and you've got security, in the case of Kuwait that was three months, in the case of Iraq it's taking a little bit longer as we all know. But then what happens is you shift from the emergency to a more permanent procurement system. And in fact in six months we were now having full and open competition, worldwide. We also imposed small business and small disadvantaged business goals. And I see the same thing will occur in Iraq, in fact it's occurring right now.

GWEN IFILL:

Mr. Lewis, what about that, what the general is suggesting is that there are two stages here, one is the emergency stage, which what is we've been seeing in the last six months, and that next everything begins to play out the way we're used to seeing it play out in contracting in this country.

CHARLES LEWIS:

You know, I'm a little more skeptical about the contracting process, whether it's in one phase or another phase. With all due respect to General Kelly, his own company has $1.1 billion in contracts this year and they lobbied $40,000 with Patton Bogs. We have a culture issue here. There is a group of companies and there are billions of dollars given out and they are frequently the same companies year in and year out.

You go from one conflict to another conflict, to another conflict, the exact same companies and they are peopled by former generals and former officials and that's sort of how the system works. And yes, laws are followed, but in a number of cases there is no competitive bidding, and getting informing about the contracts is virtually impossible. The State Department has not released any information to us for half a year about the contracts they let. We know we're talking hundreds of millions of dollars at least. We can't get an answer. That's not right.

GWEN IFILL:

General Kelly, I do want you to talk about the transparency question, but I also want you to respond to what Mr. Lewis just said which is that you and the company you now work for might be part of the problem.

MAJ. GEN. PATRICK KELLY:

Well, I would like to point out the company they work for, Western Solutions, which is an environmental engineering firm, has no contracts in Iraq. That's why I'm here. If I had contracts or we had contracts, I would have a conflict of interest appearing on this show. Let me just point out, though, something that I would like to just expand a little bit upon. If you take the Corps of Engineers, and I know that system so well, they do things very well. They manage their contracts well they produce quality work. And they really stress public integrity and public procurement integrity.

In the case of one of the companies that was cited by Mr. Lewis, which is Kellogg, Brown and Root, they, they, the Army and the Corps of Engineers exercised an existing contract with the Army that I might point out was consummated during the Clinton administration. It was not consummated in this administration. And they took that existing contract and then they realized that Kellogg, Brown and Root had the necessary skills, they were in the Mideast, and they could immediately go into Iraq and help restore the oil service industry, which is why they were selected. But they were not given a special contract. They already had that contract.

GWEN IFILL:

General Kelly, what about that transparency issue, though, the idea that it's so difficult to find out who's there, who's getting the money and even why?

MAJ. GEN. PATRICK KELLY:

Well, I can't comment on that because you'd have to contact the State Department and USAID and the Pentagon because I can't give you those statistics, I work for a private firm.

GWEN IFILL:

I'm not actually asking for your statistics, I'm wondering about your thought about whether there should be greater transparency on these matters.

MAJ. GEN. PATRICK KELLY:

I just do not have the same personal conflict that Mr. Lewis has, because I know about the integrity, and I know exactly how contracts are procured. And there's a contracting officer in the case of the corps of engineers who is even independent of the commander. And they are not going to select a contractor on someone's advice or someone's demand because they know they'll go to jail. That's illegal, and it's unlawful. And they won't do it.

GWEN IFILL:

Mr. Lewis, in fact, does what you found in your report suggest that the work is not getting done? Is the work getting done or is it's getting done for the best possible price?

CHARLES LEWIS:

I mean, because this is the first look at contracts in two countries and it took six months to try to get even a piece of that picture, we are not able to answer about the work being done it's too soon. As you may know the General Accounting Office is doing an investigation that's going to take at least a year to answer the question you just asked.

But I'm not trying to harp on the transparency issue, but Kellogg, Brown and Root, we are actually suing the Army Corps of Engineers, the wonderful group that we've just heard about, they released one work order out of 31 about that company, the Army Corps I'm talking about, they were unresponsive to the public about that. I have a problem. Why should the public not know how their money is being spent? It's that simple. And the fact is there has been contracting fraud over the years. We have profiles of 71 companies on our Web site or individuals that got contracts, and I would guess one or two dozen have had contracting fraud problems, and they've still gotten the contracts.

GWEN IFILL:

General Kelly, you have time for a final comment.

MAJ. GEN. PATRICK KELLY:

Yes. When I went into Kuwait, one of the first things I did, I made sure that we had an independent auditor agency accompanying us to Kuwait, which was the Defense Contract Audit Agency. We only had one. I understand in Iraq for most of the contracts over there they have not only the Defense Contract Audit Agency, they had the Army Audit Agency, and they have GAO, who is monitoring all of their contracts to ensure that there is no fraud or abuse, which is good. And that serves the public benefit.

GWEN IFILL:

General Patrick Kelly and Charles Lewis, thank you both very much.

CHARLES LEWIS:

Thank you.

MAJ. GEN. PATRICK KELLY:

Thank you.