Monday, June 9, 2003

More Flaws Found in Bidding on Iraqi Reconstruction Contracts

WASHINGTON – Governmental Affairs Committee Ranking Member Joe Lieberman, D-Conn., said Monday reports on the flawed process for awarding post-war Iraqi reconstruction contracts at the U.S. Agency for International Development underscore the need for greater transparency in government contracting and closer oversight of the bidding process. The USAID Inspector General’s office Monday made public the second of a series of inquiries into the limited-bid awards of contracts for Iraqi capital construction, airports, seaports, local governance, primary and secondary education, and others. The report indicated that the education contract was essentially awarded without competition. The total contract including option years is worth $157 million. “The IG’s office has now found serious flaws in the two USAID contracts it has investigated,” Lieberman said. “That’s a 0 for 2 record, which is, to say the least, not encouraging and which solidifies the case for public hearings. Without competitive bidding, these contracts could cost the American taxpayer millions more dollars than necessary. It is essential to good, cost-effective government that the process be open to multiple bidders and that contracting rules are followed by the book.” Lieberman first called for hearings in mid May into the closed bidding of USAID’s Iraq contracts, as well as the no-bid award of a multi-million dollar Defense Department contract to Halliburton Corp. to reconstruct Iraq’s oil production infrastructure and distribute Iraq’s oil. The new IG report on the contract to rebuild Iraq’s education sector found:

Five contractors were invited to bid, but only one did. That one company also brought in as subcontractors three of the firms invited to bid. The inescapable conclusion is that there was essentially no competitive bidding at all.

USAID did not adequately document how it selected the five contractors invited to bid, and didn’t have a clear methodology for the selection process.

Four months before the request for bids, a representative from the company awarded the contract attended an agency forum on Iraq’s educational sector. It was the only one of the five companies invited to bid on the contract that was represented at the forum. Because of insufficient documentation, the IG could not determine whether that company had been given an unfair competitive advantage, in violation regulations. The other companies invited to bid were given only two weeks notice to submit their bids. In April, Lieberman requested information from USAID on how the agency selected companies invited to bid on multi-million reconstruction contracts. Subsequently, Lieberman co-sponsored legislation requiring agencies to publicly justify any Iraqi reconstruction contract awarded without an open and competitive bidding process. Similar legislation was approved by the Senate May 22 as part of the Defense Authorization bill.