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U.S. Panel: Up To $60 Billion Wasted In Afghanistan, Iraq

Private security contractors secure a bomb site in central Baghdad in 2005. One panel member said that in some instances, reliance on contractors in Iraq and Afghanistan might have even been illegal.
WASHINGTON -- A bipartisan panel of auditors and former lawmakers says that the U.S. government has squandered as much as $60 billion over the last decade in Afghanistan and Iraq due to waste and fraud involving contractors.

The Commission on Wartime Contracting, which was established by Congress in 2008, said in its final report that not only was the waste a blow to the cash-strapped U.S. government, but that Afghanistan and Iraq could end up saddled with unsustainable U.S.-funded projects (see full report here).

"In the period when overseas infrastructure and security programs were being put into place in Iraq and Afghanistan after 9/11, there was something that was clearly wrong," said Senator James Webb (Democrat-Virginia), who co-sponsored the legislation that established the commission, in Washington at the report's release.

"There were good companies, as this commission report has been careful to mention, who were doing a lot of good work," he added, "but there also were a series of structural and leadership deficiencies in terms of how a lot of these contracts were being put into place."

The report says that the government's extensive use of contractors has at times surpassed the number of U.S. military personnel in Afghanistan and Iraq, but that "the resources devoted to managing contracts and contractors has not kept pace."

The result of the lack of oversight, it says, were ill-conceived projects that cannot be maintained, poor planning and implementation of initiatives, and criminal behavior and corruption that undermine U.S. efforts and "contribute to a climate in which huge amounts of waste are accepted as the norm."

Contractors As 'Default Option'

In total, the report says, waste and fraud involving contracting work in the two countries cost U.S. taxpayers between $30 billion and $60 billion over a decade of war -- an estimate it calls "sobering, but conservative."

According to the commission, that's as much as some 30 percent of the total funding for contracts and grants that the U.S. government will have awarded by the end of 2011 to support operations in Afghanistan and Iraq.

Among the examples given are a $40 million prison that the Iraqi government did not want and was never finished, and a $360 million agricultural project in Afghanistan that the report said paid villagers for what they used to do voluntarily.

Commission co-Chairman and former Representative Christopher Shays (Republican-Connecticut) said that in some instances, reliance on contractors might have even been illegal.

"By 'over-reliant,' we mean [that] they [contractors] have become the default option," Shays said. "Contractors have performed some tasks that are reserved for federal personnel -- tasks that the law or policy or regulations require be reserved for federal personnel. And even those that are legally permitted, contracting out some tasks may be inappropriate and unacceptably risky to U.S. interests."

He added that it was "even more troubling given that the senior defense officials have testified that the United States cannot go to war without large-scale contracting support."

The report does not specify which duties assigned to contractors are legally reserved for government employees.

Funding The Taliban

The commission also says that in Afghanistan, the insurgency's second-largest funding source after the illegal drug trade is the diversion of money from U.S.-backed construction projects and transportation contracts.

The report doesn't specify how much money is being lost in this way but says much of the loss occurs when local sub-contractors pay insurgents money to ensure their safety.

The report also warns that the amount of money wasted could grow by as much as $30 billion in the coming years.

Even though Washington has pledged to maintain a long-term support role in Afghanistan and Iraq, responsibility to maintain U.S.-funded reconstruction projects and social programs may fall to the governments in Kabul and Baghdad.

Shays said the findings underscored the need for reform in U.S. contracting practices. "With tens of billions of dollars already wasted, with the prospect of more to follow, and with the risk of recreating these problems the next time America faces a contingency, denial and delay are not good options," he said.

The report offers 15 recommendations to improve U.S. use of contractors, including a reduction in the number of private security companies used, the creation of an inspector-general to monitor contracting during contingency operations, and the appointment of a senior government official to improve planning and coordination.

The report comes at a time when budgets are being scrutinized in Washington in an effort to mitigate record debts.

The Defense Department is being forced to reduce spending by some $350 billion over the next decade.
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