Iraq Reconstruction: State In, Pentagon Out

After a thousand days of widely acknowledged failure in the job of rebuilding Iraq, the Department of Defense has quietly been relieved of that responsibility, with the State Department taking over as America's lead reconstruction agency and coordinating the work of all other government departments.

While supporters of the policies of President George W. Bush dismiss the change as an administrative adjustment, others suggest it is symbolic of a decades-old turf battle between the two departments, and the administration's increasing frustration with the reconstruction performance of the DOD and its contractors.

They also point to the switch as an example of how the president goes about making policy changes in Iraq: exhorting the public to "stay the course" while changing it without fanfare.

Steven Aftergood, who heads the Project on Government Secrecy for the Federation of American Scientists, told us, "It's a belated recognition that existing policy on reconstruction and stabilization has been woefully inadequate."

The switch was made through a little-noticed December 7 Presidential National Security Directive. Its objective is "to promote the security of the United States through improved coordination, planning, and implementation for reconstruction and stabilization assistance for foreign states and regions at risk of, in, or in transition from conflict or civil strife."

The Directive says, "The Secretary of State shall coordinate and lead integrated United States Government efforts", coordinating these efforts with the Secretary of Defense to ensure harmonization with any planned or ongoing U.S. military operations across the spectrum of conflict."

It explains that to maximize the effectiveness of U.S. rebuilding efforts, "a focal point is needed (i) to coordinate and strengthen efforts of the United States Government to prepare, plan for, and conduct reconstruction and stabilization assistance and related activities in a range of situations that require the response capabilities of multiple United States Government entities and (ii) to harmonize such efforts with U.S. military plans and operations."

To achieve the objectives of the Directive, the Secretary of State will appoint a Coordinator for Reconstruction and Stabilization with wide-ranging responsibilities.

These include "developing and approving strategies…for reconstruction and stabilization activities directed towards foreign states at risk of, in, or in transition from conflict or civil strife: develop guiding precepts and implementation procedures for reconstruction and stabilization which, where appropriate, may be integrated with military contingency plans and doctrine; and coordinate reconstruction and stabilization activities and preventative strategies with foreign countries, international and regional organizations, nongovernmental organizations, and private sector entities…(and) identify lessons learned and integrate them into operations."

While reconstruction efforts in Iraq and Afghanistan have been made far more difficult by security concerns, they have also been plagued by massive corruption, overcharging by many American contractors, lack of transparency and accountability in the contracting process, and confusion about lines of responsibility among U.S. Government agencies, and between the U.S. and Iraqi governments.

The State Department has now been tasked to "resolve relevant policy, program, and funding disputes among United States Government Departments and Agencies with respect to U.S. foreign assistance and foreign economic cooperation, related to reconstruction and stabilization…."

The Bush Directive, which is global in scope and not limited to Iraq and Afghanistan, also established a Policy Coordination Committee (PCC) for Reconstruction and Stabilization Operations. The PCC will be chaired by the Coordinator for Reconstruction and Stabilization and a member of the National Security Council (NSC) staff.

The State Department will lead U.S. Government efforts to prevent countries at risk "from being used as a base of operations or safe haven for extremists, terrorists, organized crime groups, or others who pose a threat to U.S. foreign policy, security, or economic interests."

Problems with contractors and with financial management in general have dogged the DOD for many years. The agency's contracting procedures have been widely condemned and, in one much-publicized case, the department's most senior contracting official received a prison term for conflicts of interest and other offenses involving the Boeing Corporation, one of the largest military contractors. Other DOD contractors have also proved problematic; in particular, the Halliburton Company has been accused of substantial over-charges on many of its no-bid contracts and has become the poster child for a broken system.

Government accountants have never been able complete a satisfactory audit of DOD expenditures.

Most recently, the Government Accountability Office (GAO) revealed that DOD contractors have received $8 billion over five years in bonuses on weapons programs that were often plagued by significant cost overruns, performance problems and delays.

The GAO, an independent auditor for Congress, reviewed 93 of 597 military contracts in force between 1999 and 2004 that included the possibility of a bonus. Contractors on average were awarded about 90 percent of the bonus money available, the agency said.

For example, Lockheed Martin and Boeing received $1.7 billion, or about 91 percent of $1.847 billion available on four major programs, including the Joint Strike Fighter, even as these programs "experienced significant cost increases, technical problems and development delays," the GAO said.

The GAO report also cited the Boeing-United Technologies RAH-66 Comanche helicopter, canceled in April 2004, and two other Lockheed programs: the F/A-22 fighter and a satellite system to detect enemy missile launches.

Bonuses paid on these troubled programs ranged from 74 percent to 100 percent of the potential award, the agency said. "These practices undermine the effectiveness of fees as a motivational tool and marginalize their use in holding contractors accountable," the audit agency said. "They also serve to waste taxpayer funds."

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