Baghdad bonanza

Introduction

KBR, Inc., the global engineering and construction giant, won more than $16 billion in U.S. government contracts for work in Iraq and Afghanistan from 2004 to 2006—far more than any other company, according to a new analysis by the Center for Public Integrity. In fact, the total dollar value of contracts that went to KBR — which used to be known as Kellogg, Brown, and Root and until April 2007 was a subsidiary of Halliburton—was nearly nine times greater than those awarded to DynCorp International, a private security firm that is No. 2 on the Center’s list of the top 100 recipients of Iraq and Afghanistan reconstruction funds.

Another private security company, Blackwater USA, whose employees recently killed as many as 17 Iraqi civilians in what the Iraqi government alleges was an unprovoked attack, is 12th on the list of companies and joint ventures, with $485 million in contracts. (On November 14, the New York Times reported that FBI investigators have concluded that 14 of the 17 shootings were unjustified and violated deadly-force rules in effect for security contractors in Iraq, and that Justice Department prosecutors are weighing whether to seek indictments.) First Kuwaiti General Trading & Contracting, which immediately precedes Blackwater on the Top 100, came under fire in July after a pair of whistleblowers told a House committee that the company essentially “kidnapped” low-paid foreign laborers brought in to help build the new U.S. embassy in Baghdad. First Kuwaiti and the U.S. State Department denied the charges.

Other key findings from the Center’s analysis:

• Over the three years studied, more than $20 billion in contracts went to foreign companies whose identities—at least so far—are impossible to determine.

• Nearly a third of the companies and joint ventures on the Top 100 are based outside the United States. These foreign contractors, along with the $20 billion in contracts awarded to the unidentified companies, account for about 45 percent of all funds obligated to the Top 100.

• U.S. government contracts for work in Iraq and Afghanistan have grown more than 50 percent annually, from $11 billion in 2004 to almost $17 billion in 2005 and more than $25 billion in 2006.

According to David Walker, the comptroller general of the United States, the outsourcing of government has escalated across the board over the past five years, although oversight of the process has shrunk during this same period. In an interview with the Center for Public Integrity, Walker noted particular problems with military contracting. “We have identified about 15 systemic, longstanding acquisition and contracting problems that exist within the Defense Department—which is the single biggest contractor within the U.S. government—that we are still not making enough progress on,” said Walker, who heads the Government Accountability Office. “I mean, this stuff isn’t rocket science.”

While KBR earns the top spot among individual companies and their subsidiaries, the firm’s $16 billion in obligated contracts is eclipsed by $20.4 billion in contracts that went to a nebulous collection of companies identified by the U.S. government only as “foreign contractors.” The Center has filed a Freedom of Information request for the 50 largest contracts—collectively worth some $19.6 billion—awarded to these unnamed companies. The largest of these contracts is worth more than $6 billion—a sum that would catapult the unidentified recipient to the No. 2 spot on the Top 100.

In October 2003, when the Center published “Windfalls of War,” Halliburton’s Kellogg, Brown, and Root was also the top recipient of U.S. government contracts for the postwar effort, with more than $2.3 billion in awards over two years. By contrast, Bechtel, the only other company on that 2003 roster to have received more than $1 billion in awards, won a second large contract in January 2004—this one for $1.8 billion—but left Iraq after completing its work in March 2007. Since this Top 100 represents contracts newly awarded in fiscal years 2004 to 2006, Bechtel is not on the list.

When the 2003 study was published, federal agencies did not comprehensively distinguish war contracts in Iraq and Afghanistan from other government contracts; therefore, Center researchers had to flush out these contracts one by one. Since then, however, most such contracts list Iraq or Afghanistan as their “place of performance,” making the contracting process more transparent and the search for data—available from the General Service Administration’s Federal Procurement Data System—more methodical.

But not all contracts for Iraq and Afghanistan are reported in this federal data system, including awards originating at one contracting agency in Baghdad, which reports only some aggregate totals for inclusion in the central database. Because the agency has so far refused to furnish these missing contracts, the Center is now seeking copies via Freedom of Information Act requests.

Officials in the Baghdad office say that these contracts are unlikely to change the rankings of the largest contractors on the Top 100, although some companies at the bottom of the list may change. According to Major General Darryl A. Scott, the commander of the Baghdad contracting office, these contracts are inaccessible not through willful omission, but because of the computer resources and human labor that would be required to integrate them into the main federal procurement database.

Iraq remains the clear priority of the U.S. government, the Center’s research shows, with more than seven times as many contracting dollars designated for spending there as for Afghanistan. Furthermore, minority-owned businesses received less than one-tenth of 1 percent of the total awards as primary contractors. (The GSA’s data does not provide subcontracting information.) And the data reveals that 12 of the 32 foreign contractors on the Top 100 are based in Turkey—far more than any other nation.

In the early months of the Iraq war, U.S. government officials were criticized for awarding contracts there without competition. Since then, however, much of the criticism has centered on cost-plus contracts, which guarantee that a vendor will earn either a fixed amount of profit or a set percentage of profit above its cost.

Of the $13 billion awarded through cost-plus contracts in Iraq and Afghanistan for 2004 to 2006, 30 percent was awarded through simple cost-plus, fixed-fee arrangements that offer no incentives for performance or cost savings. The largest amount awarded to one vendor through cost-plus contracts, more than $8 billion, went to KBR. Much of that was the result of a contract to provide logistical support for U.S. Army combat operations.

Senior Database Fellow John Perry provided data analysis for this story.