4.F 76/1:IR 1/26
IRAQ: IS RECONSTRUCTION FAILING?
HEARING
BEFORE THE
COMMITTEE ON FOREIGN AFFAIRS
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
MAY 22, 2007
Serial No. 110–75
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Two months later I am not sure that I share Mr. Bowen’s opti-
mism.
Two months ago the Iraqi Government was still not producing ei-
ther oil or electricity at rates that matched pre-war performance,
nor were they able to spend a significant amount of the money they
had budgeted to improve either situation.
Two months later the same can still be said.
Last week the Government Accountability Office reported that
over the last 4 years between 100,000 and 300,000 barrels of oil a
day went unaccounted for. I used to have a car like that. [Laugh-
ter.]
It is just gone. GAO figures at an average price of $50 per barrel
that amounts to somewhere between $5 million and $15 million a
day that may have been stolen, siphoned, or more likely, not even
produced. What the GAO has uncovered here is that neither the
Iraqis nor we know precisely how much oil is being produced.
After having spent more than $2 billion of the American tax-
payers' money on rebuilding Iraq's oil infrastructure, you would
think that we would at least know how much oil was being pro-
duced.
Since oil revenue makes up 95 percent of Iraq's income and since
oil production is one of the milestones we are using to measure re-
construction progress, it seems to me that precision in this regard
would be something of a priority. On the up side I suppose it is
possible that Iraq is actually producing much more oil than we
thought, more than they reported, but somehow I doubt it. So for
the past 4 years Iraq has actually been missing its oil production
targets by a lot more than we had previously thought.
imilar situation exists in the electricity sector, but at least
there the Iraqis seem to be able to measure how much electricity
is being produced. The only problem is that it is simply nowhere
near enough. Three billion dollars later and Baghdad still has less
electricity than before the war. The Iraqis have had the same tar-
get for producing electricity since it was established by the CPA in
2004, and have fallen consistently short.
There are lots of reasons for both these situations as well as the
other areas where reconstruction has fallen short, like the lack of
enough clean drinking water or the many hospitals and clinics that
have been refurbished but lack enough doctors to provide care. The
total absence of anything like a passive security environment has
to be at the top of anyone's list as the chief culprit for reconstruc-
tion failing, and while Mr. Bowen makes a valid point about other
projects having been successfully completed until the big things get
done, and done right, the little things don't count for enough.
So Mr. Bowen's cautious optimism notwithstanding 4 years into
our ill-conceived effort to reconstruction Iraq, this social studies
teacher would give it an F.
Chairman LANTOS. Thank you, Mr. Ackerman.
The gentleman from California, Mr. Rohrabacher.
Mr. ROHRABACHER. Thank you very much, Mr. Chairman, and I
appreciate both your words and those of Ranking Member Ileana
Ros-Lehtinen. There is much wisdom in both of them.
I think that if there is any blame that we can have about things
we haven't done totally right in this committee in the past, I think


We shouldn't be in Iraq in the first place. We have destroyed a
sovereign nation, their economy and their infrastructure. We con-
tinue to stay and embolden the insurgents who have continued the
destruction. What we should be doing is bringing our troops home
safely, investing only in their safe return home, and then investing
in helping Iraq rebuild its nation, but not militarily; helping them
through non-military means.
That, as far as I am concerned, is the only way we will get cor-
ruption out of the system. We need to give the Iraqis the pride in
their own nation. We need to support them in their rebuilding, and
we need, in turn, to add to their economy. We have to stop the
drain of U.S. dollars going to corrupt U.S. contractors, and it is just
a shame that we are there in the first place.
But we can do this, but we can't do it by—and I will say this
later in my remarks—by having legislation that has benchmarks
on the Iraqi Government that will then in turn punish them by
taking away any of their reconstruction dollars when we are the
ones that are there destroying their country along with their insur-
gents, but we are embolding the whole process.
It is a closed circle. We have to stop this. I thank you.
Chairman LANTOS. The gentlelady from Arizona, Ms. Giffords.
Ms. GIFFORDS. Thank you, Mr. Chairman. I appreciate the oppor-
tunity to hear from Mr. Bowen today, and I also appreciate the tes-
timony that you have provided and you are going to talk about in
terms of this really critical issue, which is Iraqi reconstruction.
We have spent about $35 billion, the United States, on recon-
struction efforts so far in Iraq, and of course, we have lost over
3,000 soldiers with about 25,000 other soldiers being wounded.
When our forces went into Iraq, we went in swiftly and decisively,
and of course, we removed Saddam Hussein, but, unfortunately,
since that time we have seen the civilian leadership in Iraq has
failed to win the peace and helped to really build a secure, stable
environment in order to help with the reconstruction efforts.
Just consider the news stories from the last 48 hours, at least
25 people were killed and 60 wounded when a car bomb exploded
near a popular market in the Amil district in southwestern Bagh-
dad. At least four college students were killed in the last 48 hours
and 25 wounded in a mortar attack at a college in northern Bagh-
dad, and then two bodies of airport workers in the Arbil were shot
and found tortured in the town of Ramadi.
When I look at the provincial reconstruction efforts that are tak-
ing place in Afghanistan compared to the efforts that are taking
place in Iraq, I think we can learn some real lessons. Unfortu-
nately, we have not been able to really engage with the Iraqi cul-
ture, the Iraqi people to the same degree that we have a cultural
understanding and a better relationship with the Afghanis.
In my home district in Arizona, I have Fort Huachuca, which is
an army intelligence center, which precisely trains on this issue
cultural understanding, language understanding, awareness. So I
am hoping to hear from Mr. Bowen what additional steps we can
take to better understand the culture, to have a better sense of the
dollars that we are spending, why they are not working in compari-
son to Afghanistan.


I had occasion to be briefed in the preliminary progress being
made by our troops in Ramadi, and to create a congressional dele-
gation there last month, see RP projects are critical tools in their
efforts to stabilize the country.
Mr. Chairman, I also appreciate Mr. Bowen's efforts to give cred-
it where credit is due. His testimony makes it clear that various
entities, notably the multinational force in Iraq, improved their
product in consultation with his efforts, and I appreciate that.
Despite the fact that there are setbacks, challenges, and short-
falls, I believe and trust we will hear some today, that there is good
news in Iraq. I thank our witness for his efforts in improving and
reforming our efforts in that country, and I thank you again, Mr.
Chairman, for the vision of calling this hearing.
I yield back.
Chairman LANTOS. Thank you very much.
We are fortunate to have with us today the person with the
greatest expertise on Iraq reconstruction. Mr. Stuart Bowen is the
Special Inspector General for Iraq Reconstruction. In that role,
since October 2004, Mr. Bowen has uncovered enormous waste,
fraud, and corruption, and abuse in the Iraq reconstruction process.
He serves an essential oversight function because only with full
and open disclosure of what has gone wrong can we hope to im-
prove our rebuilding efforts.
Mr. Bowen has a long and distinguished legal and republican po-
litical career, and he previously served as Inspector General for the
Coalition Provisional Authority. He has just returned from another
trip to Iraq and we are very interested to hear his observations.
Mr. Bowen, the floor is yours.
STATEMENT OF STUART W. BOWEN, JR., J.D., SPECIAL INSPEC-
TOR GENERAL FOR IRAQ RECONSTRUCTION, OFFICE OF
THE SPECIAL INSPECTOR GENERAL FOR IRAQ CONSTRUC-
TION
Mr. BOWEN. Thank you, Chairman Lantos.
I would like to introduce the lady who just filled my glass-my
mother, who is with us this morning. So thank you.
[Applause.)
Chairman LANTOS. May I interrupt you for a moment?
Mr. BOWEN. Yes.
Chairman LANTOS. Ms. Bowen, it is a pleasure meeting you, and
we commend you for having done a very good job in bringing up
a great public servant. Thank you for being here.
Mr. BOWEN. Thank you, Mr. Chairman, for those kind words.
Chairman Lantos, Ranking Member Ros-Lehtinen, members of
the committee, thank you for this opportunity to return to you on
the continuing work of the Office of Special Inspector General for
Iraq Reconstruction.
The title of this hearing poses the question, as Mr. Pence just
noted, "Is reconstruction failing?” The short answer is “No,” but it
must be put in context as every report I issue puts in context, and
as our "lessons learned” put it in context. That is, that the recon-
struction program in Iraq has been fraught with challenge, a mix-
iccess and failure, shortfalls and successful projects
achieved.


11
Finally, insufficient systems for effective human capital manage-
ment. That was in our first lessons learned report issued almost 2
years ago now. We simply identified the need to develop a civilian
reserve corps in parallel with our military reserve corps, a team
that is trained and ready to go to exercise leadership in post-con-
flict relief and reconstruction programs.
Our second recommendation in our latest lessons learned report
echoes one that I have made to this Congress and in previous re-
ports, and that is the funding of S/CRS, the entity created by
NSPD 44, to manage this process. The entity needs authority and
appropriations before it can robustly address this important mat-
ter.
I just returned from my sixteenth trip to Iraq, spent 10 days
there, and it was a palpably dangerous environment. There is no
doubt about that. I met with the key leadership in the Iraq recon-
struction program, and addressed our latest findings in our quar-
terly reports, which was issued 3 weeks ago.
The United States program, as that report points out, is moving
beyond the Iraq Relief and Reconstruction Fund. That is an impor-
tant message to continue to articulate for this reason.
The United States no longer bears the preponderant burden for
financing the recovery of Iraq. That burden rests squarely on the
shoulders of the Iraq Government, and it is why the budget execu-
tion matter that Mr. Pence raised is so critical
Last year the Iraq Government simply did not execute its capital
budget program effectively, most notably, in the Ministry of Oil, ar-
guably the most critical economic ministry. Oil generates 94 per-
cent of Iraq's budget, 75 percent of its GDP, and it spent a tiny
fraction of its capital budget last year. Nine percent of the Iraq Re-
lief and Reconstruction Fund was invested in that oil sector be-
cause it was assumed that Iraq would be able to begin funding
itself, but it hasn't 4 years on, and that gap must be closed.
The budget execution initiative is ongoing. Ambassador Carney
is pushing it. There are consequences that are being put in place
over there, but they must be applied. Iraq must spend its capital
budget.
The United States effort now, as it moves beyond the IRRF, will
increasingly focus on targeted support to specific programs aimed
at furtheri
capacity development within the Iraq system. Most
notable among these programs is the Provincial Reconstruction
Team Initiative which began just over a year ago and has signifi-
cantly expanded this year.
SIĞIR issued an audit of that initial plan last October and found
some problems in resources, staffing, and security. The security
issue is still there, but resources and staffing of the original 10
PRTs have made progress. The 10 new embedded PRTs, which are
just standing up and are embedded with military brigades and
under direction of the brigade commander, are a novel evolution of
this program. The whole program is designed to build governance
out at the provincial level, and especially in Baghdad, four of these
new PRTs is in Baghdad. They are a bit of a misnomer calling
them Provincial Reconstruction Teams, since their focus really is
capacity building, which includes reconstruction as
just a component.


13
which we are doing, and continue to push for improved project
oversight in Iraq.
We continue to monitor Iraq's anti-corruption efforts, and frank-
ly, I was very concerned based on my visits this trip with the Com-
mission on Public Integrity, and the reality is that he has lost
much of his enforcement power through political means. He cannot
prosecute, as he told me just last week, ministers or former min-
isters by direction of the Prime Minister's Office.
The legislation that was designed to create and empower the CPI
has been pulled back from the Council of Representatives, and is
being revised in the Prime Minister's Office, endangers the inde-
pendence of the CPI, and finally, there is a provision in the Iraq
Criminal Code, Article 134(b), that permits any minister, by fiat,
to exempt any employee from prosecution.
So there is a bulwark, essentially, existing within the political
system that fundamentally undermines the capacity of the Com-
mission on Public Integrity, which is their FBI, to enforce and fight
corruption. As we have reported, Mr. Chairman, I know over and
over again, corruption is the second insurgency, I have called it, in
Iraq. It undermines much progress that we are trying to achieve,
and continues to be a frustration.
We continue to push a wide range of audits forward. We are
moving into focused financial reviews. We will have an audit of
Bechtel, the Bechtel contract. We are also auditing DynCorp and
Blackwater and Parsons over the next quarter, and we are com-
paring how the Gulf Region Division of Corps of Engineers is doing
versus the Air Force Center for Environmental Excellence, the two
key contracting entities in Iraq. We are going to have a review in
the next quarter of the support to the anti-corruption effort in Iraq.
We are looking at a comparison of design/build contracting
versus direct contacting, another lessons learned from the Iraq ex-
perience, and we are doing, as I said, assessments of the PRT pro-
gram and we will continue to look at the CERP program.
Our CERP review, though, will move from an audit perspective
to an inspection perspective. Not this quarter but the following
quarter, I have directed my inspection staff to go look at only
CERP projects, so you get some input about how those projects
have done.
This next quarter from inspections you will get eight more re-
ports about sustainment, so it will flesh out a little bit more that
issue. Most notably, we are visiting the Al Dura Power Plant,
which has been the subject of some concern, I know, in this com-
mittee.
Our investigations team continues to make progress. I met with
every member of my staff when I was over there all of the audi-
tors, inspectors and investigators. I have to tell you, while I can't
go into detail with respect to the investigations, I am very im-
pressed with the progress that we are making in a very coordinated
interagency effort that is yielding fruit. That will become evident
over time.
As I have been talking about, our lessons learned reports, I
think, are perhaps the most important components of our work in
the long run because they help address the challenges that have
burdened the program, and explain how the Congress and the


33
Ms. WOOLSEY. Well, you are funny and smart.
Mr. ACKERMAN. Thanks.
Ms. WOOLSEY. We are all smart, but not very many of us are
funny.
You know, we do so much in Iraq from the United States that
we are forcing upon the Iraqis, and thank you, Mr. Bowen. You
have been great. You have stayed calm under pressure. This is not
an easy thing for you to be doing. It just seems that I have to ask
you, are there enough Iraqi people capable of doing these recon-
struction jobs themselves?
I mean, why aren't we letting them be the contractors for their
own country?
Mr. BOWEN. You have raised several issues there.
Ms. WOOLSEY. I know. I have a hundred issues.
Mr. BOWEN. Well, no, they are good issues.
Ms. WOOLSEY. Yes.
Mr. BOWEN. The first one is the capacity of Iraqi subcontractors,
which the United States is using more often than not. The reality
is the design/build contracts or cost-plus contracts that result in
subcontracting in-country and most of the subcontractors are
Iraqis, and that has proven, as our inspections and our audits
show, to be a mixed bag. Plumbing is an issue. The Baghdad Police
College is the most notable example of a lack of capacity to carry
out basic construction.
The other issue you raise is why aren't the Iraqis executing their
own capital budgets, hiring their own contractors, engaging in their
own recovery, and the answer to that is they must moving forward
because the Iraq Relief and Reconstruction Fund is spent, and the
United States is no longer doing Reconstruction, capital “R.” It is
doing targeted aid, and that is why for Iraq to make progress, it
must address the oil sector issue we talked about, and it must de-
velop a plan that it implements effectively nationwide to continue
to restore its infrastructure.
Ms. WOOLSEY. Do we have any data that tells us if it is less safe
for American contractors that the Iraq contractors? Is there some
sense of pride when it is built at home by locals versus the U.S.
stamp on it or an international stamp on it?
Mr. BOWEN. Well, that is what I am told. For example, an Iraqi
subcontractor gets the award from an American contractor; they
will ask that Americans not visit the site because by visiting the
site it raises the danger at the site.
Ms. WOOLSEY. That should be a lesson to us, shouldn't it? That
is political. You don't have to answer that one.
Do we have a separate process for monitoring and auditing what
the Iraqis are doing with international funding, mostly United
States funding, but international funding versus what our own con-
tractors? I mean, do we separate that? Do we know what
Haliburton is doing versus what an Iraqi contractor is doing, or
through their local governments?
Mr. BOWEN. Well, our oversight is—my oversight is of taxpayer
dollars, the Iraq Relief and Reconstruction Fund in fiscal year 2006
money appropriated for relief and reconstruction. So that is all that
I have information about.


34
You know, whether there is similar oversight of how the Iraqis
themselves are spending their money and managing it, I don't have
any information on that.
Ms. WOOLSEY. So I am going to ask a question that is kind of
a political answer, so you might not want to answer it, but in ask-
ing it everybody will know what I think. Well, no, I am not going
to ask it yet.
So by the way, would you be able to tell us what you think we
should be doing in the short term in Iraq or what we should be
doing in the long term on reconstruction, reconstruction?
Mr. BOWEN. As I said, “Reconstruction,” capital “R,” is concluded.
There are still some large projects, especially in the electricity sec-
tor, that the Gulf Region Division of the Corps of Engineers is
managing, about $2 billion left to spend but relative to the overall
investment what remains is relatively small.
The targets for the next phase of support to protect our interests
in Iraq are appropriate. One, the Provincial Reconstruction Team
effort, it is the most important national capacity to building pro-
gram in Iraq, and it is about trying to get the provincial councils
to manage their provinces.
There are 18 provinces, 18 provincial councils. You know, politics
is local, democracy is a local event, and those councils are largely
new. And the other thing that needs to happen, of course, is there
need to be new provincial elections because the elections of 2005
were boycotted by the Sunnis. This created an imbalance in rep-
resentation in a number of provinces, and new elections will fix
that imbalance.
Ms. WOOLSEY. Okay. I am going to ask my question. Like the
Iraqis saying, United States stay away from our projects because
it is safer if you are not there, would the international community
weigh in if they didn't think it was all controlled by the United
States? Would they weigh in to a greater degree if the Iraqis were
controlling their budgets?
Mr. BOWEN. You know, that is not an area I can really comment
on.
Ms. WOOLSEY. Okay. I appreciate that.
Mr. BOWEN. Thank you.
Ms. WOOLSEY. And I think they would.
Mr. BOWEN. Thank you.
Mr. ACKERMAN. Mr. Poe.
Mr. PoE. I have a few questions. I am way over here on the end.
Mr. BOWEN. Good to see you, Judge...
Mr. PoE. Every war has its war profiteers. I think it has always
been that way. When the smoke clears, there are always suddenly
new millionaires. And when the smoke clears on this war, who do
you think the new millionaires are going to be?
Mr. BOWEN. Well, it is a good question. I will just give you a lit-
tle anecdotal insight from my travels through Amman. The Jor-
danians are not happy because of the number of Iraqis who have
immigrated into Jordan with large sums of money which has
caused the real estate prices in Amman to triple in the last year,
according to my Jordanian friend.
Mr. POE. A couple other questions on the corruption and fraud.
Where is the money going? I mean, I know it is lining the pockets