Administrative costs high in Iraq reconstruction projects, US audit finds

Administrative costs high in Iraq reconstruction projects, US audit finds
October 25th, 2006  
Team Infidel

Topic: Administrative costs high in Iraq reconstruction projects, US audit finds

Administrative costs high in Iraq reconstruction projects, US audit finds
Media: The Associated Press
Date: 25 October 2006

WASHINGTON - Administrative costs for a handful of reconstruction projects
in Iraq ate up 11 percent to 55 percent of the total costs and were not
monitored well by officials there, according to a U.S. government audit.

The audit, done by the Special Inspector General for Iraq Reconstruction,
looked at a number of contracts and detailed five totaling $1.3 billion
(?1.04 billion). It found that more than $460 million (?366.8 million) was
spent on overhead costs, including transportation, mobilization,
administration, personnel support and security.

The report suggested that some of the costs may be underestimated because
the government did not consistently track the administrative amounts or
require companies to report them in the same way. The U.S. Congress has
approved $18.4 billion (?14.67 billion) in reconstruction money for Iraq.

The administrative costs largely occurred between the date the contractors
arrived in Iraq to begin the project and the time when substantial work
began. Often, the companies were in Iraq for months before they were
actually able to begin work on their reconstruction project, said Jim
Mitchell, a spokesman for the reconstruction oversight agency.

Halliburton subsidiary Kellogg, Brown & Root accrued the highest percentage
of overhead costs _ billing the government for $163 million (?129.97
million), or 55 percent of its total contract cost, the audit found. Parsons
Iraq Joint Venture, a second company, had overhead costs equaling nearly
$134 million (?106.85 million), or 43 percent of its total project cost.

Parsons Delaware, in two different projects, received 35 percent and 17
percent in administrative costs, or $108 million (?86.12 million) and $41.6
million (?33.17 million) respectively. The fifth project detailed in the
audit was with Lucent, which received nearly $15 million (?11.96 million) in
overhead costs, or 11 percent of the total project amount.

Poor planning by the government contributed to the KBR costs, the audit
said. And it also noted that the 11 percent figure for Lucent was probably

The Iraq reconstruction audits have routinely found significant problems
with the contracting and building in the war-torn country, ranging from
alleged fraud to lack of oversight. They have also noted that contractors
often face significant obstacles and other business problems, particularly
with security, in Iraq.

The audit recommended that more specific reporting requirements be adopted
for the reconstruction project that would detail the administrative costs
and that contractors are monitored better. It also recommended that the
government plan better to reduce the amount of time contractors spend
mobilized for the work before they are actually able to begin the project.

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