Update on Iraq contracting problems alarms lawmakers

House appropriators on Thursday voiced dismay at the depth of contracting problems in Iraq, vowing to work with other congressional committees to fix a system that has resulted in billions of reconstruction dollars wasted.

During a House Defense Appropriations Subcommittee hearing, Rep. James Moran, D-Va., called the problems "egregious abuses of the procurement system" involving practices U.S. officials would "never tolerate" here.

Moran appeared particularly alarmed by a report from the Special Inspector General for Iraq Reconstruction that found that California-based Parsons Corp. had not completed work on the vast majority of healthcare centers it was under contract to build.

The company, which has received $186 million over the last three years for the healthcare center project, had completed construction on only 15 of the 142 planned centers. Of those 15 centers, only eight are open to the public, said Joseph McDermott, an investigator for the special inspector general's office. McDermott added that 119 health care sites are currently under construction, however.

In addition, the inspector general's office found that Aegis Defense Services, which has thousands of contract personnel in Iraq, has not fully performed its contract responsibilities, McDermott said.

The company also has failed to sufficiently document employees -- many of whom work as security personnel -- who carry weapons in Iraq. Another contract with a potential value of $1.8 billion to create an Iraqi police training program awarded to Dyncorp International Inc. in February 2004 and was canceled late that year, but the company continued to receive money until 2006, McDermott said.

The State Department found that more than $36 million in weapons and other equipment at the training program were not accounted for. "I think some of what you've said is shocking," said Rep. Marcy Kaptur, D-Ohio.

During the hearing, McDermott acknowledged that many of the contracting issues in Iraq had been exacerbated by continuing violence in the country. But he stressed that challenges presented by the security issues "do not decrease the importance of oversight."

The Defense Department, which spent $151 billion on service contracts in fiscal 2006, has made some effort to increase oversight, said John Hutton, Government Accountability Office director of acquisition and sourcing management. But problems -- including poor requirements, inadequate competition and insufficient contract surveillance -- still exist, he said.