October 31, 2003

U.S. Contractors Reap the Windfalls of Post-War Reconstruction

2x2=4...$500K in campaign donations + $8 billion in
Iraq contracts = war profiteering...2x2=4...But does
the "US mainstream news media" have the cojones to
count or will they get weak-kneed? And yes, there are
Democratic hands in the House and the Senate that are
bloody too, but not as bloody as the _resident's or
the Republican Party, and not Dean (D-Jeffords), Clark
(D-NATO) or Kerry (D-Mekong Delta)...

Center for Public Integrity: More than 70 American companies and individuals have won up to $8 billion in contracts for work in postwar Iraq and Afghanistan over the last two years, according to a new study by the Center for Public Integrity. Those companies donated more money to the presidential campaigns of George W. Bush—a little over $500,000—than to any other politician over the last dozen years, the Center found.


Published on Thursday, October 30, 2003 by the Center
for Public Integrity
U.S. Contractors Reap the Windfalls of Post-War Reconstruction

WASHINGTON, October 30, 2003 — More than 70 American
companies and individuals have won up to $8 billion in
contracts for work in postwar Iraq and Afghanistan
over the last two years, according to a new study by
the Center for Public Integrity. Those companies
donated more money to the presidential campaigns of
George W. Bush—a little over $500,000—than to any
other politician over the last dozen years, the Center

Kellogg, Brown & Root, the subsidiary of
Halliburton—which Vice President Dick Cheney led prior
to being chosen as Bush's running mate in August
2000—was the top recipient of federal contracts for
the two countries, with more than $2.3 billion awarded
to the company. Bechtel Group, a major government
contractor with similarly high-ranking ties, was
second at around $1.03 billion.

However, dozens of lower-profile, but well-connected,
companies shared in the reconstruction bounty. Their
tasks ranged from rebuilding Iraq's government,
police, military and media to providing translators
for use in interrogations and psychological
operations. There are even contractors to evaluate the
contractors. (See company list.)

Nearly 60 percent of the companies had employees or
board members who either served in or had close ties
to the executive branch for Republican and Democratic
administrations, for members of Congress of both
parties, or at the highest levels of the military.

The results of the Center's six-month investigation
provide the most comprehensive list to date of
American contractors in the two nations that were
attacked in Washington's war on terror. Based on the
findings, it did not appear that any one government
agency knew the total number of contractors or what
they were doing. Congressional sources said they hoped
such a full picture would emerge from the General
Accounting Office, which has begun investigating the
postwar contracting process amid allegations of fraud
and cronyism.

The Center's investigation focused on the three
agencies that awarded most of the Iraq and Afghanistan
contracts in 2002 and 2003—the Pentagon, the State
Department and the U.S. Agency for International
Development. It found that nearly every one of the 10
largest contracts awarded for Iraq and Afghanistan
went to companies employing former high-ranking
government officials or individuals with close ties to
those agencies or Congress.

In addition, those top 10 contractors were established
political donors, contributing nearly $11 million to
national political parties, candidates and political
action committees since 1990, according to an analysis
of campaign finance records.

Indeed, most of the companies that won contracts in
Iraq and Afghanistan were political players. According
to the Center's analysis, the companies, their
political action committees and their employees
contributed a total of nearly $49 million to national
political campaigns and parties since 1990. Donations
to Republican Party committees—the Republican National
Committee, the Republican Senatorial Campaign
Committee and the National Republican Congressional
Committee—outpaced those to Democratic committees,
$12.7 million to $7.1 million. Among individual
candidates, President George Bush received more money
from these companies than any other, a little over

The Center's investigation found that 14 of the
contractors were awarded U.S. government work in both
Iraq and Afghanistan. Combined, those companies gave
nearly $23 million in political contributions since
1990, and 13 employ former government officials or
have close ties to various agencies and departments.

Although Afghanistan was once ground zero in
Washington's war on terrorism, spending on Iraq was
more than double that on Afghanistan. According to the
Center's investigation, which examined contracts
awarded in 2002 through September 2003, at least $5.7
billion in government funding was slated for U.S.
contractors in Iraq, compared to nearly $2.7 billion
for Afghanistan. Osama bin Laden's al Qaeda network,
blamed for the Sept. 11, 2001, attacks on the United
States, had been based in Afghanistan, and prior to
the March 2003 war on Iraq, U.S. officials had said
that a democratic Afghanistan was central to winning
the war on terror.

The Center's findings are based, in part, on 73
Freedom of Information Act requests and appeals to
USAID, the Pentagon and its various uniformed services
and the State Department, as well as an analysis of
the General Services Administration database of
contracts from 1990 through fiscal year 2002—more than
7 million federal contract actions, in all.

Response to the Center's FOIA requests was sporadic,
at best, and on Oct. 29, the Center filed suit in the
U.S. District Court in Washington, D.C., against the
State Department and the Army after both agencies
failed to respond fully to its request for information
as outlined under FOIA law.

For example, media accounts have noted that the State
Department has a contract with DynCorp for work in
Iraq worth at least $50 million, which reportedly
could grow in value to as much as $800 million under
the administration's new spending request for Iraq.
The Department of State did not respond to Center
requests for information about this or any of its
other contracts in Iraq or Afghanistan.

The U.S. Army Corps of Engineers awarded a contract to
the Halliburton subsidiary Kellogg, Brown & Root,
potentially worth billions under an omnibus military
contract known as "indefinite quantity-indefinite
delivery," which is one of the largest of its kind in
U.S. history. Although the Pentagon released one KBR
"task order," or work assignment, to the Center, there
are more than 30 such orders for Iraq. (See
Outsourcing Government sidebar.)

Because of inconsistent and scarce information, the
total value of contracts awarded for reconstruction
work in Iraq and Afghanistan may be greater than what
is publicly known. The Center found that there was no
uniformity across the government in how contract
values were reported. For example, the amount listed
for an individual contract either represented only
what had been paid to date on a multiyear contract, or
a minimum and maximum dollar range of the contract,
or, in some instances, a single figure, without any
specification as to whether it represented a first
payment, a first-year total, or a multiyear total. In
some instances, the Center could determine nothing
about what a particular contract cost or entailed
because neither the company nor the government agency
responsible for it would divulge that information.

Contractor confusion
The difficulty in obtaining contract amounts and the
contradictory information coming from within
government departments raise questions about
management and oversight of the reconstruction effort.
Although USAID has said that "to ensure that U.S. tax
dollars are utilized efficiently and effectively,
USAID is providing a transparent monitoring and
evaluation system to ensure that contractors are
meeting their goals and staying on schedule," the
Center's investigation suggested otherwise.

For example, in a list of contracts initially provided
to the Center under FOIA, both USAID and the Pentagon
omitted the largest contracts they had awarded in
Iraq—to Bechtel and to Halliburton's KBR subsidiary.
Also omitted from the Pentagon's list were major
defense contractors such as Fluor, Washington Group
International and Perini Corporation, each of which
stands to earn up to $500 million for its Pentagon
work in Iraq, Afghanistan and other countries.
Combined, the three companies and their subsidiaries
have won more than $11 billion dollars in U.S.
government contracts from 1990 through fiscal year
2002. (See contractor rankings.)

Contracts awarded by USAID to Chemonics International
Inc., a private, for-profit aid company based in
Washington, D.C., provide a textbook study in the
apparent confusion surrounding the contracting

According to information provided by USAID under a
Freedom of Information request, Chemonics was
contracted to work in Afghanistan for just over $600
million. That total would rank Chemonics third among
all U.S. contractors in Iraq and Afghanistan, behind
only Halliburton and Bechtel. However, the company
disputed that total when contacted, at first insisting
it had three contracts with USAID worth just $133.9
million, then changing its figures a day later to say
that one multiyear contract it had originally put at
nearly $1.2 million actually had a potential worth of
$35 million for work in Afghanistan and several other

Getting clarification of the numbers from USAID was
difficult. "I don’t know where the FOIA office got
that information," said one USAID press officer.
Chemonics refused to release copies of its contracts,
and a Center FOIA request for the contracts is
pending. After several queries, the FOIA office told
the Center that the contract it had listed as being
worth $600 million was actually worth between $599,000
and $1.2 million, which was still inconsistent with
the numbers Chemonics provided.

"We don’t dispute it," Chemonics spokesperson Denise
Felix told the Center when asked about the USAID
number. "It is not accurate for us." In general,
contract amounts provided under FOIA varied widely;
often the value given by an agency was for the first
year's work only, not the designated total on a
multiyear contract. When the Center obtained copies of
contracts, it became clear that at least some
departments calculated the total cost of a contract by
tallying all its option years. (See FOIA sidebar.)

In other instances, contract lists provided by the
agencies did not correspond with information on the
agencies' Web sites or with public announcements by
companies receiving the contracts. Often, the agency
was at a loss to explain these discrepancies. In
addition, when asked for copies of contracts which
USAID told the Center it had awarded, agency officials
responded that it would take an indeterminate amount
of time to produce some of them because they would
have to be retrieved from global field offices.

Even when FOIA requests were granted, key information
about government contracts often was redacted, or
blacked out. For example, the Pentagon provided the
Center copies of seven contracts awarded to Science
Applications International Corporation for work in
Iraq. The total contract value was omitted, although
some unit pricing—typically redacted under a rule that
gives companies a right to oppose FOIA requests about
their government contracts—was left in. That same rule
was cited by one Pentagon FOIA officer as
justification why the department was not releasing a
Raytheon Aerospace contract worth more than $7
million. Raytheon Aerospace, along with its affiliated
companies, was the 11th–ranked government contractor
among companies with contracts in Iraq and
Afghanistan, earning $2.7 billion since 1990,
according to the Center's analysis.

SAIC officials refused to discuss their contracts with
the Center, directing all calls to the Pentagon press
office, which did not answer Center queries. However,
a congressional source, speaking on condition of
anonymity, told the Center that one SAIC media
contract in Iraq likely would be worth more than $50
million by the end of 2003. The total value of SAIC's
contracts could not be determined.

Since February 2003, SAIC—the country's largest
employee-owned research and engineering company—has
been in charge of the Iraqi Reconstruction and
Development Council, a Pentagon-sanctioned group of
Iraqis that is effectively functioning as the
country's temporary government. The senior members of
IRDC hold positions at each of 23 Iraqi ministries,
where they work closely with U.S. and British
officials, including L. Paul Bremer, head of the
Coalition Provisional Authority. The Council's
official task is to rebuild the structures of a
government that are expected eventually to be handed
over to the new Iraqi authority. Members of the IRDC
are officially employed by SAIC, according to the

SAIC has also been hired to rebuild Iraq's mass media,
including television stations, radio stations and
newspapers. SAIC, which is not generally known for its
media expertise, runs the "Voice of the New Iraq," the
radio station established in April 2003 at Umm Qasr
with U.S. government funds. (For more information see
SAIC Reconstruction Contracts and company profile.)

Revolving doors
In many ways, SAIC is typical of the kinds of American
contractors working in Iraq and Afghanistan. Among
companies with contracts in the two countries, SAIC
was the third-largest recipient of U.S. government
contracts over the last 12 years; the company, its
employees and PAC contributed $4.7 million to national
political campaigns, the Center's investigation found.

SAIC's largest customer is the U.S. government, which
accounts for 69 percent of its business, and its
company roster is a revolving door of
government-corporate influences.

David Kay, the former U.N. weapons inspector who was
hired by the CIA to track down weapons of mass
destruction in Iraq, is a former vice president of
SAIC. Kay left SAIC, where he oversaw homeland
security and counterterrorism work, in October 2002.

Christopher "Ryan" Henry left SAIC, where he was vice
president for strategic assessment and development, in
February 2003 to become principal deputy
undersecretary of defense for policy. Henry now works
for the office overseeing his former employer,
directly under Douglas J. Feith, the undersecretary of
defense for policy who has been deeply involved in
postwar planning.

SAIC's Executive Vice President for Federal Business
and Director Duane P. Andrews served as assistant
defense secretary from 1989 to 1993, when he joined
SAIC. Board member W.A. Downing served as deputy
assistant director for international counter-terrorism
initiatives on the National Security Council and
joined SAIC after retiring as an Army general in 1996.
Bobby Ray Inman, a board member until October 2003, is
a retired U.S. Navy admiral who once directed the
National Security Agency and served as deputy director
of central intelligence. Inman is also a member of the
board of directors of Fluor, another contractor in
Iraq and Afghanistan.

Chemonics International, which according to
information provided by USAID's FOIA office holds the
third-richest contract of all American companies in
Iraq and Afghanistan, offers another interesting
case-in-point. Founded by a former State Department
foreign service officer, the company receives 90
percent of its business from USAID. Scott Spangler,
the company's principal owner with 52 percent of the
company's stock, was a senior USAID official during
the first Bush administration. While at USAID,
Spangler served as assistant administrator for the
Africa Bureau, associate administrator for operations
and acting administrator. Spangler became principal
owner of Chemonics in March 1999 and chaired the board
until April 2002. His wife, Jean Spangler, is also on
Chemonics' board of directors. Together, the Spanglers
have contributed $98,460 to Republican Party causes
since 1990, according to the Center's campaign finance
records analysis.

Perini Corporation, working in Iraq and Afghanistan on
contracts worth up to $525 million, is owned by a
group of investors that includes Richard Blum, husband
of Sen. Dianne Feinstein, a Democrat from California
who serves on the Appropriations Committee and the
Select Committee on Intelligence.

Sullivan Haave Associates Inc.—identified by the
Pentagon as a contractor, though the company says it
was a subcontractor to SAIC—was founded by Carol A.
Haave, currently the deputy assistant secretary of
defense for security and information operations. (See
Small Company sidebar.)

Another contractor with interesting ties is the Center
for Afghanistan Studies at the University of Nebraska,
Omaha, which was established in 1972 and claims to be
the only institutional base in the United States
exclusively concerned with Afghan affairs. The
center's director, Thomas E. Gouttierre, is an old
friend of Zalmay Khalilzad, President's Bush's nominee
as ambassador to Afghanistan and a former paid adviser
to Unocal. The oil company, which until 1998 was
working on a plan to construct trans-Afghan natural
gas and oil pipelines, has funded the CAS' work in
Afghanistan and hosted members of the Taliban on
visits to the United States. The CAS also reportedly
has longstanding ties to Washington policymakers and,
especially, the intelligence community.

In January 2002, USAID awarded the Center for
Afghanistan Studies $6.5 million to provide books and
training for Afghanistan's interim government to
resume schooling. However, critics charged that the
books, written in the 1980s, contained Islamic
material and verses from the Koran in violation of the
U.S. Constitution's separation of church and state.
That followed earlier criticism of the CAS' ties to
members of the Taliban leadership during its previous
U.S. government contracts.

In January 2003, the CAS, which had been involved in
Afghanistan education projects since 1973, lost the
USAID contract for Afghan educational textbooks and
teacher training to Creative Associates International
Inc., a private for-profit aid company based in
Washington, D.C. Though the CAS did not get a new
contract, it received a no-cost extension of its 2002
contract from USAID to continue training teachers from
its office in Afghanistan.

Raheem Yaseer, the CAS assistant director and a former
Kabul University professor, said efficiency and
quality were secondary to politics in the process of
selecting companies and organizations to work in

"It depends on who knows who in the administration,
USAID and the State Department," Yaseer said in an
interview. "Universities try their best to recruit
professionals, but these Belt[way] bandits … just grab
anybody that comes in handy."

In addition to its USAID contract for educational
reform in Afghanistan, worth at least $60 million,
Creative was awarded a USAID contract in March 2003
for educational development work in Iraq. That
contract, which may be extended by two years, is meant
to cover everything from desks and blackboards to
textbooks, curriculum reform, academic standards and
teacher training and is worth up to $157 million.
Creative was the 11th largest recipient of
government-funded contracts in Iraq and Afghanistan,
according to the Center's analysis.

Four months before the Iraq contract was awarded,
USAID hosted a roundtable discussion of Iraq's
educational system, which a Creative representative
attended. It was the only company later invited to bid
on the contract present at that meeting. Although
Creative refused to answer Center questions about the
meeting, USAID identified its representative as Frank
Dall and said he was invited not on behalf of the
company but because he was "literally the only
available education authority to have worked directly
with the Saddam regime." USAID noted Dall's previous
work in the Middle East with UNICEF and UNESCO, but
did not mention that Dall was a former USAID employee,
having served as the agency's education director for
the Middle East.

USAID's comments came in response to an internal
inspector general report, commissioned after questions
arose about possible impropriety surrounding
Creative's selection as a contractor in Iraq. The
other companies invited to bid were given only two
weeks notice to submit their bids.

"The documentation is clear that only one of the five
contractors that were subsequently invited by USAID to
bid on the contract participated in an initial
roundtable discussion," a June 2003 USAID memorandum
detailing the IG's findings said. "In addition, we
conclude that USAID Bureau officials did not adhere to
the guidance on practical steps to avoid
organizational conflicts of interest."

Another onetime senior USAID official is also on the
Creative staff. In July 2002, the agency's former
chief of staff Richard L. McCall Jr. was selected to
direct Creative's Communities in Transition division.
Before joining USAID, McCall was a senior policy
adviser to the deputy secretary of state and spent
many years working on Capitol Hill, including as a
staffer for the Senate Foreign Relations Committee and
the Senate Democratic Policy Committee.

Close ties
The Center's investigation also found that many
contractors had close working relationships with one
another. For example:

Creative International subcontracted three of the four
other companies that were invited to bid on the USAID
contract in Iraq, including Research Triangle
Institute and DevTech Systems Inc. Creative is also a
subcontractor to Research Triangle Institute on RTI's
Iraq contract.
In addition to its Afghanistan contracts, Chemonics is
a subcontractor in Iraq to Research Triangle Institute
and BearingPoint, which also has a contract in
Vinnell Corporation—which became the first American
private military company in 1975 with its contract to
train the Saudi National Guard—is using SAIC and
Military Professional Resources Inc. to help train the
New Iraqi Army. SAIC and MPRI separately also have
contracts in Iraq.
The Center did not examine subcontractors in any
systematic way, and it was not clear how much of the
reconstruction business they held. USAID Administrator
Andrew Natsios has said that more than 50 percent of
the money that goes to contractors actually ends up
with subcontractors.

In addition to contracts awarded by the three
departments that were a focus of the Center for Public
Integrity's investigation, a handful of other major
American companies won contracts for work in Iraq,
including ChevronTexaco, JPMorgan and MCI/WorldCom.
(See ChevronTexaco and JPMorgan sidebar.)

ChevronTexaco, a major U.S. government contractor and
political party donor, joined five other international
oil companies selected by the Iraqi State Oil
Marketing Organization to market Iraqi oil. The
expected revenue of $300 million from the sale of oil
will be controlled by the U.S. government for use in
rebuilding Iraq. Including Chevron, there were only
two contracts for oil-related work among the dozens
reviewed by the Center.

JPMorgan, the nation's second-largest bank, which was
implicated in the Enron scandal, has been contracted
by the Coalition Provisional Authority to run a
consortium of 13 banks from 13 countries that will
constitute the Trade Bank of Iraq. Bank consortium
members are not expected to earn much revenue
initially, but banking publications report the real
windfalls will come once Iraq's oil production resumes
full capacity and anticipated billions of dollars flow
through the Trade Bank for financing large development

MCI, formerly WorldCom, was hired by the Pentagon to
build a wireless phone network for officials and aid
workers in the Baghdad area. MCI's reconstruction
activities in Iraq were not disclosed in documents the
Defense Department provided to the Center under a
Freedom of Information Act request. However, an MCI
spokesperson said the Pentagon-led Coalition
Provisional Authority awarded the contract to MCI in
late May 2003. The contract was part of a short-term
communications plan costing the Pentagon approximately
$45 million. The MCI spokesperson would say only that
the company's contract amounted to less than $20
million. When it was still named WorldCom, the company
paid a $500 million fine to the Securities and
Exchange Commission for overstating its cash flow by
nearly $4 billion, and it was temporarily banned from
receiving federal contracts.

Seeking oversight
In April 2003, the General Accounting Office, the
investigative arm of Congress, announced it would
launch a broad investigation into methods used to
award contracts to rebuild Iraq. The awarding of
no-bid or closed-bid contracts in Iraq to Halliburton
and Bechtel prompted the calls for investigation,
although, as the Center investigation found, a
majority of contractors in Iraq and Afghanistan have
significant government ties.

"There is growing evidence that favored contractors
like Halliburton and Bechtel are getting sweetheart
deals that are costing the taxpayer a bundle but
delivering scant results," said Rep. Henry Waxman, a
California Democrat and the administration's most
vocal critic on the contracting process.

Vice President Dick Cheney is a former defense
secretary and former CEO of Halliburton and still
receives deferred compensation from the company.
Bechtel's ranks of executives and board members
include former Secretary of State George Shultz,
former State Department official Charles Redman and
former Marine four-star Gen. Jack Sheehan, who served
as NATO's Supreme Allied Commander for the Atlantic
before his retirement in 1997 and now sits on the
Defense Policy Board, a Pentagon-appointed body that
advises on defense issues.

GAO sources told the Center that the agency is
conducting two separate probes of contracts awarded
for work in Iraq and Afghanistan. The first covers all
civilian contracts for Iraq reconstruction involving
appropriated funds and stemmed from requests by two
Democratic congressmen, who complained of cronyism in
the contracting process. That report is expected to be
completed in late 2003 or early 2004. A second probe
involves a handful of multibillion-dollar, multiyear
military contracts that cover work in both countries.
The primary focus of that probe will be the Army's
LOGCAP (Logistics Civil Augmentation Program) contract
held by Kellogg, Brown & Root and one held by Johnson
Controls Co., which created Readiness Management
Support LC to manage AFCAP, the Air Force Contract
Augmentation Program. GAO officials estimate the
second probe will take about a year to complete.

Many of the companies initially selected for work in
Iraq and Afghanistan were awarded contracts because
they had the necessary security clearance or
established contracting reputations with the
government departments and agencies assigning the
work, officials have said. But U.S. lawmakers have
been pressing for a more transparent process in the
next round of reconstruction contract awards.

Waxman, in an Oct. 15 statement, said "the root cause
of these problems is the administration's insistence
on virtually absolute secrecy about how it is spending
the taxpayer's money."

Acknowledging a lack of general oversight in the
previous contracting process, the government has
announced that it will consolidate all future
contracts under a new Baghdad-based office as of
November. The office is to be set up under the
Coalition Provisional Authority and headed by a
retired U.S. Navy admiral, David Nash, reporting
directly to CPA head L. Paul Bremer.

"Now the whole contracting procedure is confusing,"
John Shaw, deputy undersecretary of defense for
international security, told a London conference in
mid-October, where he announced the new office.
"There's been many complaints. This new procedure we
hope is going to bring greater accountability and

Kevin Baron, Maud Beelman, Neil Gordon, Laura
Peterson, Aron Pilhofer, Daniel Politi, André Verlöy,
Bob Williams and Brooke Williams contributed to this
report, which was written by Ms. Beelman.

© 2003, The Center for Public Integrity


Posted by richard at October 31, 2003 07:32 AM