This article in Business Week describes the vast amounts of taxpayer dollars that are being lost to graft and corruption in Iraq:
The U.S. Military has lost billions to fraud and mismanagement by private contractors in Iraq who do everything from cooking soldiers’ meals to building hospitals to providing security. That raises a question: Does Pentagon outsourcing make sense?
“The presumption is that it is cheaper,” says Jerrold T. Lundquist, director of the defense and aerospace practice at the consulting firm McKinsey & Co. Competitive bidding can keep the price of services down. Contractors are, in theory, more nimble at mobilizing and paring back their forces than a huge military bureaucracy. A recent study by the nonpartisan Congressional Budget Office concluded that in 2004 the U.S. reduced its costs by one-third for feeding and housing troops by paying one contractor to do the work — a savings of nearly $3 billion. Such findings point to the conclusion that even with a lot of fraud and waste, outsourcing may still pay off.
But some experts on the topic aren’t convinced. Because no one has an authoritative overall estimate of how much has been lost in Iraq to contractor deceit and incompetence, and many investigations are just getting under way, the financial harm could in the end outstrip any savings. There’s also the intangible cost of taxpayers seeing their money wasted or stolen rather than spent to support troops risking their lives and dying. “What has happened in Iraq is just disgraceful,” says Jeffrey H. Smith, a former Central Intelligence Agency general counsel during the Clinton Administration who now represents military contractors in private law practice.
Instances of military outsourcing gone bad in Iraq are now legion. For example, Parsons Global Services Inc. of Pasadena, Calif., lost its contract to build 150 health centers after it completed just six centers and collected $190 million — $30 million over the project’s budget. The U.S. Special Inspector General for Iraq Reconstruction is now reviewing all of Parsons’ Iraq work. Officials at Parsons, which eventually completed an additional 13 centers, stand by their work, saying employees performed well under “extremely volatile conditions.” [full text]
The article goes on to discuss no-bid contracts such as those given to Halliburton subsidiary Kellogg, Brown & Root — contracts which have been charged by auditors as excessive, duplicative, or otherwise questionable. The author makes the obvious point that this problem could be addressed by stepping up contract procurement oversight, but instead, these quality control measures are being further reduced.