$23 Billion Lost in Iraq. Give or Take a Billion.

The BBC puts a number on corruption in the new Iraq: US$23 billion lost, stolen or missing.

As the BBC points out, the total cost of this theft and systemic mismanagement is much higher than the total of dollars leaked away -- because much of this money was intended for essential projects, like rebuilding the Iraqi security forces. Obviously, these forces haven't been effective to stabilize the country, suggesting that cost must now be measured in blood as well as dollars.

BBC uncovers lost Iraq billions

BCC/Panorama video

Image: US Army helicopters over Samarra, Iraq (cc James Gordon).

-- by Jonathan Werve --

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USA: $50M Air Force Contract Was Rigged

The Department of Defense's Inspector General has investigated a relatively small US$50 million Air Force contract, painting a vivid picture of how conflicts of interest play out at the highest levels of government.

Despite the distress of employees involved in the contracting, the weight of rank pressed the deal forward, which awarded a contract for entertainment at the Air Force's Thunderbirds air shows to retired military officers with ties to the Thunderbirds. After complaints from an opposing bidder (one of which bid to do the work at half the price), the contract was canceled, but no criminal charges were filed.

Washington Post:

The report offers a searing, blow-by-blow account of how a relatively mundane Air Force contract spun out of control, highlighting serious conflicts of interest in the selection process, officers stacking the deck in favor of friends, and others influencing a system designed to eliminate such favoritism in spending taxpayer dollars.

Washington Post coverage here.

Our previous coverage of the funding struggles of the Inspectors General.

Image: (cc) Elaine Mesker-Garcia

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Tanzania: Procurement Scandal Takes Down Prime Minister

Prime Minister Edward Lowassa has resigned Friday, following the completion Wednesday of a Parliamentary investigation into his dealings with the supposedly U.S.-based Richmond Development Company (RDC). The company turned out to be non-existent, with assets barely more than a post-office box. The government's ill-fated hiring of RDC to provide badly needed electrical power plants was covered at length in the Global Integrity Report: Tanzania, published last week.

Energy Minister Nazir Karamagi and East African Cooperation Minister Idrissa Msabaha have also resigned. The president of Tanzania has dissolved the Cabinet. Tanzanian media appears quite happy with the resignations. Mizengo Pinda has been named the new prime minister.

Global Integrity's analysis of anti-corruption in Tanzania identified systemic weaknesses in the oversight of public expenditure, noting that "the Public Accounts Committee is chaired by the opposition, but the committee still has very limited influence, and the chair frequently makes public comments defending the status quo."

In related news, the ongoing scandal has prompted some enthusiastic local coverage of the Global Integrity Report: Tanzania.

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Singapore leads charge against UN contracting watchdog

NEW YORK: What does the General Assembly do when a UN panel discovers US$600 million in shady contracting? Kill the messenger, apparently. We are not shocked to learn that Singapore -- not a nation known for being receptive to criticism -- has led a push to disband the 18-member investigative panel after a Singapore official was targeted by investigators. We are somewhat shocked that so many countries have gone along with it that the resolution killing the panel seems likely to pass.

The panel, which costs US$4.9 million a year, is a rare UN operation that might actually generate a profit.

International Herald Tribune:
UN body plans to end investigation of contracts

Photo: Taylor Christian Jones (cc)

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Blackwater in Iraq: Poor oversight sets the stage for deadly abuse of power

WASHINGTON: On September 17, 2007, in western Baghdad, private contractors hired to protect a convoy of U.S. State Department officials opened fire on nearby cars. When the smoke cleared, the Iraqi government reported that 17 civilians were dead and demanded that their American employer, Blackwater USA, leave Iraq. Subsequent investigations by Congress describe a pattern of excessive force by Blackwater guards abetted by lax oversight by the State Department.

"There is no evidence... that the State Department sought to restrain Blackwater's actions, raised concerns about the number of shooting incidents involving Blackwater or the company's high rate of shooting first," wrote Democrats on the House Committee on Oversight and Government Reform (.PDF of report).

More fundamentally, no one is quite sure what the U.S. has been receiving for the billions it spends on more than 25,000 private security contractors in Iraq. Data on U.S. procurement in the 2006 Global Integrity Report suggest that these problems are rooted in a failure to enforce the rigorous procurement laws the United States has on the books. Despite a large federal bureaucracy and vast technological resources dedicated to streamlining public procurement, conflicts-of-interest continue to undermine the U.S. government's ability to detect fraud and abuses.

Non-competitive bidding in U.S. public procurement has exploded in the first half of this decade, with the value of such contracts growing from US$67 billion in fiscal year 2000 to US$145 billion in fiscal year 2005. Perhaps nowhere has the trend towards privatizing government crystallized more clearly than in matters of national security, where one finds closed bidding procedures, backroom deals, and the habit of high-ranking procurement officials passing through the "revolving door" to work for large government contractors after retirement.

A good example of this, as reported in the New York Times, is the long-standing sweetheart deals between the Air Force and Boeing, which won a lucrative contract from the Air Force last November to supply search-and-rescue helicopters. The contract is being contested by Boeing rivals Lockheed and Sikorsky on the grounds of unfair competition and conflict-of-interest.

The Blackwater debacle is, thus, only the latest in a string of controversies related to the allotment of contracts to private actors with close connections to government. Data from the 2006 Global Integrity Report suggest systemic problems in the U.S. procurement process. Even though the U.S. earned a "Very Strong" rating in procurement - in large part due to robust legal measures on the books - it scored less well in the enforcement of penalties for major violations and of conflicts-of-interest regulations amongst bidders. On occasion, these procurement violations have involved the "complicity (or at least acquiescence) of federal officials" as well, according to Global Integrity data.

The Project on Government Oversight, the country's leading non-government watchdog tracking the federal procurement process, notes that "as of September 2007, the top 50 federal government contractors [...] have since 1995 paid civil, criminal, and administrative fines, penalties, restitution, and settlements totaling almost US$13 billion. This amount is somewhat understated, as many cases involve confidential out-of-court settlements, or penalties that were anonymously split between two or more companies." When put in context, the U.S. ranks alongside countries such as Armenia, the Democratic Republic of Congo, Georgia, Guatemala, Sudan, and Tajikistan in earning low scores when it comes to enforcing procurement regulations.

If the U.S. is serious about enacting substantive governance reform to ensure that incidents like Blackwater are to be avoided in the future, it might do well to strengthen the enforcement of oversight and accountability measures in public procurement, where the boundaries between public and private interests have dissolved with increasing speed during the past decade.

Further Reading

Center for American Progress. "Shining Light on Blackwater USA" (2 October 2007)
Center for Public Integrity (Windfalls of War: US Contractors in Afghanistan and Iraq)
Michael A. Cohen and Maria Figueroa Kupcu. "Privatizing Foreign Policy," World Policy Journal, vol. 22, no. 3 (Fall 2005): 34-52
Neil Gordon. "Tracking the Misconduct of Federal Contractors," Nieman Watchdog (September 26, 2007)
David Johnston. "Immunity Deals Offered to Blackwater Guards," The New York Times (October 30, 2007)
Scott Lilly. A Return to Competitive Contracting: Congress Needs to Clean Up the Procurement Process Mess, Center for American Progress, May 2007
Daniel Politi. "Winning Contractors - An Update" (Center for Public Integrity, 2004)
Federal Contractor Misconduct Database, Project on Government Oversight (POGO)
Peter W. Singer. Corporate Warriors: The Rise of the Privatized Military Industry (Ithaca: Cornell University Press, 2003) [amazon.com]
Paul R. Verkuil. Outsourcing Sovereignty: Why Privatization of Government Functions Threatens Democracy and What We Can Do about It (Cambridge: Cambridge University Press, 2007) [amazon.com]
Andre Verloy. "Documents Reveal Concern Regarding Halliburton Contracts" (Center for Public Integrity, 2004)
Leslie Wayne. "Again, Boeing is Scrutinized on a Contract," The New York Times (3 March 2007)
Janine R. Wedel. "Dangers of Private Agendas in Foreign Policy," Financial Times (11 August 2004)

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