Iraq: Frequently Asked Questions About Contracting

Congressional research reportMar 18, 2005

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Order Code RL32229

CRS Report for Congress

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Iraq: Frequently Asked Questions

About Contracting

Updated March 18, 2005

name redacted, Coordinator,

name redacted, and name redacted

Foreign Affairs, Defense, and Trade Division

name redacted and name redacted

Resources, Science, and Industry

name redacted and name redacted

Knowledge Services Group

Congressional Research Service ˜ The Library of Congress

Iraq: Frequently Asked Questions

About Contracting

Summary

This report provides answers to frequently asked questions about contracts for

the reconstruction and recovery in Iraq after Operation Iraqi Freedom (OIF), and

questions about contracts for providing support services to the U.S. military during

and after OIF. The report describes the governing authorities for federal government

contracting policy in general, and Iraqi contracting policy in particular; the

contracting process, issues, and challenges; the authority of individual federal

agencies; contract awards and the identity of major prime contractors; the business

procurement process, congressional oversight, and resources for additional

information.

Due to the transfer of sovereignty on June 30, 2004, this report will not be

updated again. For a more comprehensive discussion of Iraq, activities since the

transfer of sovereignty, and overall Iraqi reconstruction issues, see CRS Report

RL31339, Iraq: U.S. Regime Change Efforts and Post-Saddam Governance, and

CRS Report RL31833, Iraq: Recent Developments in Reconstruction Assistance. For

a fact sheet on the application of federal procurement statutes to contracts for the

reconstruction of Iraq, refer to CRS Report RS21546, Iraq Reconstruction

Resources: Fact Sheet. For a detailed discussion on the application of federal

procurement statutes to reconstruction contracts in Iraq, refer to CRS Report

RS21555, Iraq Reconstruction: Frequently Asked Questions Concerning the

Application of Federal Procurement Statutes.

Key Policy Staff

Area of Expertise

Name

CRS

Division

Telephone and E-mail

Army Corp of

Engineers

(name redacted)

RSI

7-....

[redacted]@crs.loc.gov

Defense Acquisition

Defense Contracts

(name redacted)

Energy Policy

(name redacted)

RSI

7-....

[redacted]@crs.loc.gov

Humanitarian

Assistance, PostConflict Affairs

(name redacted)

FDT

7-....

[redacted]@crs.loc.gov

Civilian Procurement

and Business

Resources

Carolyn Smith

KSG

consultancy

to FDT

7-....

[redacted]@crs.loc.gov

Reconstruction

Assistance Policy

and Programs

(name redacted)

FDT

7-....

[redacted]@crs.loc.gov

Military Contracting

Reconstruction

Policy Research

Mike Waterhouse

KSG

consultancy

to FDT

Abbreviations:

FDT = Foreign Affairs, Defense, and Trade

KSG = Knowledge Services Group

FDT

7-....

[redacted]@crs.loc.gov

7-....

[redacted]@crs.loc.gov

Contents

Frequently Asked Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Contracting Authority and Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

What Are the Statutory, Regulatory, and Other Controlling Authorities

for How Federal Government Contracts Are Awarded? . . . . . . . . 1

What Countries’ Businesses Are Eligible to Compete for Contracts

Funded with U.S. Appropriated Reconstruction Funds? . . . . . . . . 3

Will Israeli Businesses Be Eligible to Participate in Iraqi Contracts? . . 3

Contracting Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

What Federal Agencies or Governing Bodies Are Involved in

Contracting for the Reconstruction of Iraq? . . . . . . . . . . . . . . . . . 4

Under the Broader Question of Different Authorities, What Is the

USAID Contracting Role in Iraq? . . . . . . . . . . . . . . . . . . . . . . . . . 4

Contractor and Contract Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Who are the Major Contractors Involved in the Iraq Reconstruction

Effort? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

What is LOGCAP, and What Contracts Have Been Awarded

under LOGCAP? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Was Halliburton Awarded a Sole-source Contract (A Contract

Awarded Without Full and Open Competition)? . . . . . . . . . . . . . . 8

As a Result of Questions Raised over the Awarding of the

Halliburton Sole-Source Contract, What Action Did the Army

Corps of Engineers (Corps) Take? . . . . . . . . . . . . . . . . . . . . . . . . . 9

What Has Replaced the Oil-for-Food Program (OFFP) Structure?

Who Is Providing Oversight Authority? . . . . . . . . . . . . . . . . . . . . 9

What Can Explain the Cost Differential in Halliburton/KBR Oil

Fuel Purchases from Kuwait and Turkey? . . . . . . . . . . . . . . . . . . 11

Have Halliburton/KBR Fuel Purchases Had an Undue Impact on the

Spot Market Price of Gasoline in the Persian Gulf Area? . . . . . . 13

Procuring New Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Which Product Areas and Sectors Are the Focus of Future

U.S. Contracts? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

How Can U.S. Businesses Get Federal Government Contracts for

Work in Iraq? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Are There Additional Resources for Business Opportunities in Iraq? . 17

Congressional Oversight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

What Are the Potential Congressional Oversight Actions to Address

the Iraqi Contracting Situation? . . . . . . . . . . . . . . . . . . . . . . . . . . 18

For Additional Reading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

List of Tables

Table 1. The Top 20 Contractors, Ranked by Total Contract Value, for

Activities in Iraq and Afghanistan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Table 2. FY2004 Contracts Awarded for Iraq Infrastructure Reconstruction,

by Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Table 3. Other FY2004 Contracts Awarded for Iraq Infrastructure

Reconstruction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Iraq: Frequently Asked Questions

About Contracting

This report provides

This report describes contracting issues raised

answers to key questions about

during the United States’ occupation of Iraq.

contracts for reconstruction and

For a more comprehensive discussion of Iraqi

recovery in Iraq, in the wake of

activities since the transfer of sovereignty as

Operation Iraqi Freedom (OIF)

well as overall Iraqi reconstruction issues, see

and questions about contracts

CRS Report RL31339, Iraq: U.S. Regime

for providing support services

Change Efforts and Post-Saddam Governance,

to the U.S. military during and

and CRS Report RL31833, Iraq: Recent

after OIF. Given the multiple

Developments in Reconstruction Assistance;

agencies, various contracting

for a fact sheet on the application of federal

authorities, and the multiple

procurement statutes to contracts for the

congressional appropriations

reconstruction of Iraq, refer to CRS Report

enacted into law for Iraqi

RS21546, Iraq Reconstruction Resources: Fact

reconstruction and recovery

Sheet; and for a detailed discussion on the

operations, as well as questions

application of federal procurement statutes to

about laws governing contractor

reconstruction contracts in Iraq, refer to CRS

integrity in the face of

Report RS21555, Iraq Reconstruction:

allegations of questionable

Frequently Asked Questions Concerning the

contractor behavior, some

Application of Federal Procurement Statutes,

Members of Congress have

or contact the individual authors as listed in

raised questions about the size

this report.

and scope of Iraqi contract

awards, as well as the policies

that govern how the contracting process works.

This report describes the governing authorities for federal government

contracting policy in general, and Iraqi contracting policy in particular; the issues and

challenges of the federal contracting process; federal agency authorities; past,

present, and anticipatory contract awards, and major prime contractors; business

problems, including oil fuel procurement; congressional oversight; and resources for

additional information.

Frequently Asked Questions

Contracting Authority and Eligibility

What Are the Statutory, Regulatory, and Other Controlling

Authorities for How Federal Government Contracts Are Awarded? In

general, the authority for awarding federal government contracts can be found in the

United States Code (U.S.C.) and the Federal Acquisition Regulation (FAR). The

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statute in the U.S. Code for the Competition in Contracting Act of 19841 explicitly

states that the federal government “shall obtain full and open competition through use

of the competitive procedures in accordance with the requirements of this title and

the Federal Acquisition Regulation.”2

The FAR, the Defense Federal Acquisition Regulation Supplement (DFARS),3

and the United States Agency for International Development (USAID) Acquisition

Regulation (AIDAR) outline seven different circumstances which permit DOD and

USAID to use other than full and open competition in the awarding of federal

government contracts. The Competition in Contracting Act cites the following

exceptions to the use of full and open competition.

1. There is only one responsible source available to fulfill the contract requirements.

2. The federal agency’s need for these goods or services is of such an unusual and

compelling urgency that the federal government would be seriously injured if

this contract were not awarded.

3. The federal government needs to ensure that suppliers are maintained in the event

of a national emergency, or to achieve industrial mobilization, or to establish or

achieve or maintain an engineering, development, or research capability.

4. The federal government has an international agreement to make this acquisition

through means other than through full and open competition.

5. A statute specifically authorizes or requires that the contract be made through a

specific source.

6. The use of full and open competition may compromise national security.

7. The public interest would be better served by use of other than full and open

competition.4

The procedures for submitting written justifications to use other than full and

open competition, including review requirements and delegation of authority, are

outlined in DFARS, Subparts 206.303-1 and 206.304, and AIDAR 706.3.

The Bush Administration has set additional criteria for eligibility for contracting

in Iraq. A memorandum issued by Deputy Secretary of Defense Paul Wolfowitz on

December 5, 2003, states that he has determined that it is in the public interest to

limit competitive bidding for the procurement of certain Iraqi Relief and

Reconstruction prime contracts awarded by the Coalition Provisional Authority

41U.S.C. 253. CICA can also be found in Title 10 U.S.C., Chapter 137, and was included

in Section 805 of the FY2004 National Defense Authorization Act (P.L. 108-136).

41 U.S.C. 253 (a)(1)(A).

The Defense Federal Acquisition Regulation and AIDAR are supplements to the FAR. See

DFARS, Subpart 206.3, and AIDAR, Subpart 706.3, Other Than Full and Open

Competition.

For a more detailed discussion on the seven exceptions to the use of full and open

competition, as outlined in the Competition in Contracting Act, see CRS Report RS21555,

Iraq Reconstruction: Frequently Asked Questions Concerning the Application of Federal

Procurement Statutes, by (name redacted).

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(CPA) and DOD, on behalf of the CPA.5 (See the next question for the rationale.)

The statement can be viewed at [http://www.rebuilding-iraq.net].

What Countries’ Businesses Are Eligible to Compete for Contracts

Funded with U.S. Appropriated Reconstruction Funds? Contracts issued

utilizing FY2003 appropriations were provided under sole source or limited

competition procedures that ultimately benefitted U.S. firms. The national security

interest was a key justification for excluding competition, domestic as well as

foreign. However, as most contracts were then provided by USAID and treated as

foreign assistance, they became subject to “buy America” provisions of law under the

Foreign Assistance Act of 1961, and exempt from international procurement

agreements.6 Foreign countries could, however, participate as sub-contractors to the

selected American firms, and are estimated to compose half or more of the total cost

of these contracts.

Most FY2004 appropriations — managed by the CPA — are being treated

somewhat differently. Under a previously mentioned December 5, 2003

“Determination and Findings” report issued by Deputy Secretary of Defense Paul

Wolfowitz, prime contracts are subject to full and open competition only among U.S.

firms and those of 62 other eligible countries, including Iraq, coalition partners, and

force contributing nations. The rationale for barring other countries’ firms is that it

is “necessary for the protection of the essential security interests of the United

States.” Countries ineligible to compete for prime contracts may still participate as

sub-contractors.

Some excluded countries, such as Germany and France, have protested the

decision on the grounds that it may violate the WTO’s Government Procurement

Agreement (GPA). Some U.S. officials suggest that the contracting organization,

CPA, is not covered by the GPA and need not allow open competition. Others point

out that GPA rules and existing practice exempt much foreign assistance from their

requirements. The strength of these arguments has been questioned. On January 13,

2004, President Bush announced that Canada — previously excluded as an opponent

of the war, but a significant financial contributor — could compete for contracts that

have not yet been open for bids.7

Will Israeli Businesses Be Eligible to Participate in Iraqi Contracts?

Reflecting political sensitivities in the Middle East, Israeli businesses are not eligible

for prime contracts resulting from FY2004 appropriations. Although it has

consistently backed U.S. policy in Iraq, Israel did not express official support at the

request of the Bush Administration. Israeli firms, however, are eligible to participate

The memo cites the authority as contained in 41 U.S.C. 253 (c)(7) and 10 U.S.C.(c)(7),

as implemented by FAR 6.302-7.

Section 604 of P.L. 87-195, as amended.

“Pentagon Bars Three Nations from Iraqi Bids,” New York Times, Dec. 10, 2003. “Trade

Lawyers Pick Over Small Print in Treaty,” Financial Times, Dec. 11, 2003. “Allies Angered

at Exclusion From Bidding,” New York Times, Dec. 11, 2003. “U.S. Pressed Over Iraq

Contracts Ban,” Financial Times, Dec. 12, 2003. “Iraq Contracts Open to Canadians,”

Washington Post, Jan. 14, 2004.

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in Iraq reconstruction programs as sub-contractors. Reportedly, some are currently

acting as sub-contractors in communications, water, security, and agriculture

programs.8

Contracting Agencies

What Federal Agencies or Governing Bodies Are Involved in

Contracting for the Reconstruction of Iraq? Primary authority for the

awarding and administration of Iraq reconstruction contracts has been transferred to

the U.S.-led Coalition Provisional Authority (CPA) [http://www.cpa-iraq.org/]. The

CPA Program Management Office (PMO) [http://www.rebuilding-iraq.net/] is

responsible for selecting projects and overseeing 25 Iraq reconstruction prime

contracts worth up to $18.6 billion that were originally to be awarded by February

2004. However, slipped deadlines and the accelerated sovereignty schedule have led

to a re-evaluation of the PMO’s needs and capabilities. By the end of March 2004,

only about $2.2 billion of the original $18.6 billion had been obligated. As of May,

contracts potentially worth nearly $8 billion of the $18.6 billion in FY2004

supplemental funding had been awarded. Among recent reasons for the slow progress

are the requirement for open and competitive bidding for most of the new

reconstruction contracts and inter-agency disputes over control of the funds. Security

concerns, escalating since March, have also delayed reconstruction further.

Previously, major contract awards and management for postwar Iraq

reconstruction projects were administered by USAID [http://www.usaid.gov/iraq/

activities.html]. Other federal agencies have taken steps in the awarding and/or

disseminating of information on contracts and the contracting process, including the

U.S. Army Corps of Engineers [http://www.hq.usace.army.mil/cepa/iraq/contracts.

htm] and the U.S. Department of State [http://usinfo.state.gov/mena/middle_east_

north_africa/iraq/iraq.html]. It is anticipated that USAID and the other federal

agencies involved with Iraq’s reconstruction will continue their roles in the

contracting process as a complement to CPA’s efforts. For additional information on

federal agency solicitations, application procedures, and contact information, see

CRS Report RS21546, Iraq Reconstruction Resources: Fact Sheet.

Under the Broader Question of Different Authorities, What Is the

USAID Contracting Role in Iraq? USAID has been responsible for contracting

the majority of FY2003 reconstruction appropriations in Iraq and the widest range of

economic, social, and political development programs. To date, USAID has awarded

contracts in seaport and airport administration, capital construction, theater logistical

support, public health, primary and secondary education, personnel support, local

governance, agricultural development, and higher education.

“Israel Hopes for Role in Iraq Deals Despite Snub,” Jerusalem Post, Dec. 11, 2003. “Israel

Working Behind Scenes to Get Iraq Contracts,” Globes [online], Dec. 11, 2003. “Israeli

Firms to Participate in Iraq Reconstruction as Subcontractors,” BBC Worldwide Monitoring,

Dec. 15, 2003.

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Although USAID was responsible for the FY2003-funded $1 billion

construction contract awarded to Bechtel and an FY2004-funded $1.8 billion followon project, the CPA has control over most of the funding available for reconstructionrelated activities, particularly in the infrastructure and security sectors. USAID

appears likely to continue to carry out many of the non-construction development

programs supported by FY2004 appropriations in areas such as education and

democratization. As of May 18, 2004, USAID had obligated more than $3.5 billion

in Iraq aid contracts and grants.9

Contractor and Contract Programs

Who are the Major Contractors Involved in the Iraq Reconstruction

Effort? The Center for Public Integrity has completed an investigation of contract

awards in Iraq and Afghanistan made by DOD, Department of State, and USAID; in

the course of their inquiry, Center for Public Integrity officials filed Freedom of

Information Act requests and agency appeals, studied Security and Exchange

Commission filings and other news sources, studied contract award histories

compiled by a database through the United States General Services Administration

of unclassified contracts worth more than $25,000, and made contact with

government and non-government officials who awarded and received contracts. The

following information was excerpted from the Center for Public Integrity’s website.

Table 1. The Top 20 Contractors, Ranked by Total Contract

Value, for Activities in Iraq and Afghanistan

(from 2002 through May 20, 2004)

Contractor

Headquarters

Est. Contract value

Kellogg, Brown & Root

(Halliburton)

Houston, TX

$4.678 billion

Bechtel Group Inc.

San Francisco, CA

$2.829 billion

Parsons Corp.

Pasadena, CA

$2.311 billion

Fluor Corp.

Aliso Viejo, CA

$2.254 billion

Washington Group

International

Arlington, VA

$1.633 billion

Stanley Baker Hill L.L.C.

Muscatine, IA

$1.200 billion

Perini Corporation

Framingham, MA

$1.025 billion

Contrack International Inc.

Arlington, VA

$825 million

U.S. Agency for International Development, Iraq Reconstruction and Humanitarian Relief

Weekly Update #32, May 18, 2004.

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Contractor

Headquarters

Est. Contract value

International American

Products Inc.

Columbia, SC

$528.4 million

Research Triangle Institute

Research Triangle Park, NC

$466 million

Louis Berger Group

Washington, DC

$327.6 million

BearingPoint Inc.

McLean, VA

$304.2 million

Creative Associates

International Inc.

Washington, DC

$217.1 million

Chemonics International

Inc.

Washington, DC

$167.7 million

Harris Corporation

Melbourne, FLA

$165 million

Readiness Management

Support LC (Johnson

Controls Inc.)

Panama City, FL

$111.9 million

DynCorp (Computer

Sciences Corp.)

El Segundo, CA

$93.6 million

Shaw Environmental &

Infrastructure Inc.

Baton Rouge, LA

$75.7 million

Lucent Technologies

World Services, Inc.

Murray Hill, NJ

$75 million

EOD Technology Inc.

Lenoir City, TN

$71.9 million

Source: The Center for Public Integrity’s website, at [http://www.publicintegrity.org/], viewed on

June 8, 2004. According to the Center’s website, a total of 13 new companies have received contract

awards (since the website’s last update on March 31, 2004), and nine companies previously awarded

contracts have seen contract increases totaling $5.8 billion.

The CPA Program Management Office announced on May 12, 2004, that no

protests have been filed against the $5.1 billion in construction contracts awarded in

March 2004.10

What is LOGCAP, and What Contracts Have Been Awarded under

LOGCAP? The United States Army’s Logistics Civil Augmentation Program

(LOGCAP)11 is an initiative to manage the use of civilian contractors who perform

Press Release from the Coalition Provisional Authority, Program Management Office,

Baghdad, Iraq, May 12, 2004. According to federal government contracting regulations,

there is a 10-day period following the award debriefing for unsuccessful bidders to file a

formal protest. See [http://www.rebuilding-iraq.net].

Department of the Army. Logistics Civil Augmentation Program (LOGCAP). Army

(continued...)

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services in support of DOD missions during times of war and other military

mobilizations. It was established on December 6, 1985, with the publication of Army

Regulation 700-137. LOGCAP is administered through the Army Materiel

Command (AMC), Operations Support Command, and is a centrally managed

program to coordinate efforts to negotiate pre-existing (such as contingency)

contracts with vendors from the United States. LOGCAP has been used in a variety

of military contingency operations, and provides for the awarding of contingency, or

bridging contracts, or for the inclusion of contingency clauses in peacetime contracts.

LOGCAP contracts have been previously awarded for work in Rwanda, Haiti, Saudi

Arabia, Kosovo, Ecuador, Qatar, Italy, southeastern Europe, Bosnia, South Korea,

and Kuwait.

LOGCAP contracts are “costs-plus award fee” contracts, meaning that there is

a fee paid based on contract costs, in addition to the potential for incentive fees based

on performance. Tasks administered under LOGCAP contracts are executed through

“task orders.” Task orders outline the specific actions that the contractor needs to

perform. The scope and breadth of the tasks to be performed by the contractor are

determined by the base commander. LOGCAP contracts allow task orders to be

approved as needed, without having to compete. Tasks orders have the effect of

acting as small contracts, are awarded without benefit of competition, and can be

quite large. Reportedly, three of the LOGCAP task orders given to Halliburton/KBR

under the LOGCAP III contract were each worth at least $60 million.12 In an audit

of several task orders issued under the Halliburton/KBR LOGCAP III contract, the

Defense Contract Audit Agency found a number of deficiencies, such as pointing out

that four task orders, totaling $227 million, did not show evidence of current,

accurate and complete cost or pricing data. The report concluded that ...

“Collectively, the deficiencies described above bring into question BRS’13 ability to

consistently produce well-supported proposals that are acceptable as a basis for

negotiation of fair and reasonable prices. We recommend you contact us to ascertain

the status of the BRS’ estimating system prior to entering into future negotiations.”14

The first LOGCAP contract (LOGCAP I) was awarded by the Army Corps of

Engineers to Kellogg, Brown, and Root (KBR) in1992. The contract was used to

support the United States military services and the United Nations military forces in

Somalia. The second LOGCAP contract (LOGCAP II) was awarded to DynCorp in

1994. The third LOGCAP contract was awarded to KBR (now a subsidiary of

(...continued)

Regulation (AR) 700-137, Introduction, 1-1. Purpose, p. 1.

See the OMB Watch website, at [http://www.ombwatch.org/article/articleview/1800].

The article, “Iraq Contracts Shrouded in Secrecy,” was published on September 10, 2003.

BRS is Halliburton subsidiary Kellogg, Brown and Root, or Halliburton/KBR.

Status of Brown & Root Services (BRS) Estimating System Internal Controls.

Memorandum For Corporate Administrative Contracting Officer, Defense Contract

Management Agency San Antonio (DCMAW-GEHC), 4100 Clinton Drive, Mail Drop 01660, Houston, TX 77020, Defense Contract Audit Agency, January 13, 2004, p. 3. The

audit can be viewed on Rep. Henry Waxman’s website.

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Halliburton) in 2001. According to the LOGCAP Program Manager,15 each of the

three LOGCAP contracts was awarded competitively.

The third LOGCAP contract (LOGCAP III), a ten-year contract (one base year,

followed by nine option years), was awarded in 2001 to Halliburton/KBR to perform

a variety of tasks. Initial press reports indicated that this LOGCAP III contract would

be for the development of a contingency plan for extinguishing oil well fires in Iraq;

however, subsequent press reports include such tasks as providing housing for troops,

preparing food, supplying water, and collecting trash. This contract was awarded

under a cost-plus-award-fee, indefinite delivery/indefinite quantity contract.16 The

2001 contract is based on specific task orders which are issued individually, and only

for those services that DOD feels are necessary to support the mission in the near

term. During 2003, the Halliburton/KBR LOGCAP III contract rose to more than

$3.5 billion. According to one press account, Halliburton/KBR earns a fixed 1%

profit above costs on LOGCAP III, with the possibility of an additional 2% as an

incentive bonus,17 while another press account reports that the Halliburton/KBR

LOGCAP III contract is a cost-plus, award fee contract that earns a 2% fixed fee with

the potential for an extra 5% incentive fee.18

In accordance with the Freedom of Information Act, the Center for Public

Integrity has obtained portions of the LOGCAP III Iraqi oil repair contract, and such

portions can be viewed on the Center’s website, [http://www.publicintegrity.org/].

Was Halliburton Awarded a Sole-source Contract (A Contract

Awarded Without Full and Open Competition)? On March 24, 2003, the

Army publically announced that Halliburton’s subsidiary Kellogg, Brown and Root

(KBR) had signed a contract with the Army Corp of Engineers to extinguish oil well

fires in Iraq as well as provide an assessment of the necessary repairs to the Iraqi oil

infrastructure.19 This contract was a sole-source contract to repair and operate oil

wells in Iraq. According to the Army Corps of Engineers, KBR was selected for this

contract because KBR was judged to be the only contractor that could begin

implementing the contingency plan on such extremely short notice. DOD has

asserted that KBR had equipment and personnel in the region, and requiring

competition for the work would have delayed the response to the oil well fires in

CRS verified this information in a telephone conversation with Mr. Don Trautner, DOD’s

LOGCAP Program Manager.

Indefinite delivery/indefinite quantity contracts, also known as IDIQ contracts, supply an

indefinite quantity of supplies, goods, or materials, for an indefinite period of time. See

FAR, Part 16, Types of Contracts.

Jaffe, Greg and King, Neil, Jr. U.S. General Criticizes Halliburton. Wall Street Journal,

March 15, 2004.

See Center for Public Integrity’s website at [http://www.publicintegrity.org/wow/] under

the section for Kellogg, Brown & Root (Halliburton), last updated on March 31, 2004.

York, Byron. “All Smoke, No Fire: The Administration’s Critics Are Wrong About

Halliburton and Iraq.” National Review, Vol. LV, No. 13, July 14, 2003, p. 32.

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Iraq.20 This contract was expected to be used for an interim period, until the Army

Corps of Engineers had an opportunity to award additional contracts to provide a

broader range of services to execute more of the contingency plan. It appears that

DOD justified the awarding of this contract based on an “unusual and compelling

urgency” (see DFARS 206.302-2).

As a Result of Questions Raised over the Awarding of the

Halliburton Sole-Source Contract, What Action Did the Army Corps of

Engineers (Corps) Take? The Army Corps of Engineers made the decision to

conduct a competition to award two new contracts to replace the sole-source

Halliburton contract. The Corps conducted a competition for two new costs-plusaward fee, indefinite delivery/indefinite quantity contracts for a full range of services

to assist the continued recovery operations in Iraq. The Request for Proposal (RFP)

was issued on July 9, 2003, and closed on August 14, 2003. The Corps held a

conference with all interested parties on July 14, 2003. The solicitation (Solicitation

DACA63-03-R-0021, for the Repair and Continuity Operations of Iraq Oil

Infrastructure) called for a total of two (2) contracts to be awarded, and that work

under each of these two contracts could range from a minimum amount of $500,000

to not more than $500,000,000, during the life of the contracts. On Friday, January

16, 2004, the Corps awarded Halliburton subsidiary KBR the first of the two

contracts, a competitive bid to rebuild the oil industry in Southern Iraq. Soon after,

USAID announced that Bechtel had been awarded the second of the two contracts,

a contract to repair bridges and roads, electrical power generators and grids, water

and sewage systems, and airport facilities; the contract also calls for Bechtel to

rebuild up to100 hospitals and 6,000 schools and may be worth up to $1.8 billion

dollars over two years. The contract award information can be accessed from the

Federal Business Opportunities website at [http://www.fedbizopps.gov/].21

What Has Replaced the Oil-for-Food Program (OFFP) Structure?

Who Is Providing Oversight Authority? Security Council Resolution 1483,

adopted on May 22, 2003, extended the OFFP for six months beyond its original

expiration date of June 3, 2003, during which time the program was phased out. For

information about the OFFP operations under the United Nations (U.N.), see

[http://www.un.org/Depts/oip/background/latest] and CRS Report RL30472, Iraq:

Oil-For-Food Program, Sanctions, and Illicit Trade, by (name redacted). The

resolution ended sanctions against Iraq and permitted the CPA to use oil reserves for

more long-term reconstruction purposes. It also shifted responsibility for oil profits

from the U.N. to the United States by establishing the Development Fund for Iraq,

which is held by the Central Bank of Iraq.22

Becker, Elizabeth. “Contract to Fight Oil-Well Fires Disputed; U.S. Vice-President

Repeatedly Questioned About His Ties to Firm Where He Once Worked.” Hamilton

Spectator, Apr. 14, 2003, p. D09; David Pace. “Halliburton’s Contracts in Iraq, Afghanistan

at $600 Million and Growing.” The Associated Press State & Local Wire, Business News,

Washington Dateline (Online), May 30, 2003.

Government

For a more detailed background discussion, see CRS Report RL31339, Iraq: U.S. Regime

(continued...)

Harris, Shane. U.S. Awards Second Iraq Reconstruction Contract.

Executive. Jan. 6, 2004, 2 p.

CRS-10

The OFFP was phased out on November 21, 2003 when the U.N. officially

transferred operational responsibilities to the CPA. For information about the transfer

and related links, see [http://www.state.gov/r/pa/prs/ps/2003/26540pf.htm]. Of the

overall $46 billion allocated to the OFFP during the life of the program, $39 billion

was in humanitarian assistance. The $8.2 billion of remaining assets and funds in the

pipeline when the OFFP terminated were to be transferred to the Development Fund

for Iraq. The CPA took over responsibility for the management of the multi-billion

dollars’ worth of supplies and equipment already designated for Iraq through the

OFFP delivery system and for the authentication and payment of suppliers. As of

March 31, $7.6 billion of these assets and funds had been transferred.

The CPA established a coordination center in Baghdad that took over issues

previously handled by the OFFP. The website [http://www.cpa-iraq.org/oil_

for_food] offers a section on frequently asked questions that is useful for contact

information and details on contract funding, amendments, and prioritization.

Terminating the OFFP also put a limit on contract applications for the export of

goods to Iraq. With consideration of Iraqi views and needs, a priority system was

developed. Categories of eligible and ineligible contracts are provided on the CPA

website with details about specific suppliers listed in tables arranged by country.

Press reports in February and March 2004, apparently based on material released

by the Iraqi Governing Council and in other news briefs attributed to documents

found in Iraq by the CPA, refer to allegations of abuse of the OFFP by the Hussein

government (and when the OFFP was under U.N. authority) including a list of

individuals, companies, and organizations that may have received kickbacks.23 Since

nearly the beginning of the OFFP there have been allegations of program abuses, and

audits have been conducted at different points over the life of the program.

Apparently, U.S. officials were particularly concerned about whether Iraq was using

the additional revenue to buy prohibited military and WMD technology.24

In March 2004, Secretary-General Koffi Annan suggested to the Security

Council that an independent investigation into the allegations of corruption and fraud

within the OFFP be undertaken.25 This action was later endorsed by the Security

Council. On April 21, Mr. Annan announced that the members of an independent

(...continued)

Change Efforts and Post-Saddam Governance, by (name redacted); CRS Report RL31833,

Iraq: Recent Developments in Reconstruction Assistance, by (name redacted).

See for example, “Hussein’s Regime Skimmed Billions From Aid Program,” New York

Times, February 29, 2004; “U.N.’s Statement on Iraq Oil-for-Food Funds, Letter to the

Editor,” Wall Street Journal, Feb. 18, 2004; “The Cash-for-Saddam Program,” Wall Street

Journal, Mar. 8, 2004.

For more detail on the alleged program abuses see CRS Report RL30472, Iraq: Oil-ForFood Program, Sanctions, and Illicit Trade, by (name redacted). See also, US GAO

Report United Nations Observations on the Oil for Food Program, Statement of Joseph A.

Christoff, Director, International Affairs and Trade, Testimony Before the Committee on

Foreign Relations, U.S. Senate, April 7, 2004.

“Annan Sends Letter to Security Council on Oil-for-Food Programme,” U.N. News

Service, Mar. 19, 2004.

CRS-11

panel, to be chaired by Paul Volcker, is expected to conduct a comprehensive

investigation.26 The Iraqis may be organizing an investigation of the allegations as

well.

The latest potential scandal refers to dealings that may have happened during

President Saddam Hussein’s rule and is separate from the current contract

management under the CPA. It appears that the number of Iraqis (roughly 60%)

dependent on food assistance provided by the public distribution system has not

changed since the termination of the OFFP. It is expected that the new Iraqi interim

government will take responsibility for continuing the process of closing out the

program and for managing food distribution, but specific details are not yet

available.27

What Can Explain the Cost Differential in Halliburton/KBR Oil Fuel

Purchases from Kuwait and Turkey? Halliburton/KBR, on behalf of the CPA,

has purchased oil fuels for consumption by the Iraqi population. Gasoline has been

purchased from Kuwait and Turkey, and delivered into Iraq by truck. While roughly

75% of the gasoline has come from Turkey, both the commodity cost of the fuel and

the cost of transport from Kuwait are each more than twice as high as the

corresponding charges associated with Turkish supplies. What can explain the cost

differential in each element of this transaction? In most cases, fuels for Iraq were

purchased in two geographically separate markets. Supplies came from both Turkish

suppliers and international spot markets in the Mediterranean oil trading area.

Offshore purchases were imported into the Mediterranean ports of Iskenderum and

Mersin, and shipped overland by Turkish truckers to Iraq. In other cases, fuels were

purchased from a Kuwaiti supplier not directly in the oil business, who also made

transport arrangements.

Between May and October 2003, Halliburton imported about 179 million

gallons from Turkey and 61 million gallons from Kuwait. Turkish supplies averaged

$1.24 per gallon delivered; those from Kuwait averaged $2.64, including $1.21 for

the fuel and the remainder transport and KBR fees.28 This is the most recent price

data available, despite purchases continuing through the end of March 2004.

Information on the quantities of gasoline obtained for Iraq were provided to the

House Government Reform Committee by the Corps of Engineers for the whole

“Allegations on Oil-for-Food will be Probed ‘Very Seriously,’ Annan Says,” U.N. News

Service, Apr. 13, 2004. For details on the scope of the panel’s authority see “SecretaryGeneral Names Independent Panel to Probe ‘Oil-for-Food’ Allegations,” U.N. SecretaryGeneral, Apr. 21, 2004; and “Independent Inquiry will Yield Facts on Iraq Oil-for-Food

Programme — Annan,” U.N. News Service, Apr. 22, 2004. For further response to the

allegations, see “Annan says Some Oil-for-Food Charges ‘outrageous’, Probe will Clarify

Issues,” U.N. News Service, Apr. 28, 2004; and “Probe Iraq Oil-for-Food Programme but

Don’t Forget Its Successes - U.N. Official,” U.N. News Service, May 3, 2004.

“Text of Draft U.N. Resolution Submitted by the United States to the Security Council,”

Paragraph 16, The Associated Press, May 24, 2004.

Van Natta Jr., Dan. “High Payments To Halliburton For Fuel In Iraq.” The New York

Times, Dec. 10, 2003, Section A, p.1.

CRS-12

period of Halliburton fuel procurement management. The cheaper Turkish purchases

— which comprised about 75% of a total of 464 billion gallons acquired29 — may

well have comprised all the available supply in that trading area; hence, perhaps the

need for the higher priced supplies from nearby Kuwait.

However, certain factors might have contributed to higher Kuwaiti prices:

Dealing with Dangerous Transportation. Over 60 vehicles have

been destroyed or damaged, at least 3 people killed, and several

more injured.

Using Short-term Supply Contracts. The 30-day supply contract

specified in the supply arrangement with Kuwait may have been too

short to line-up additional trucks, which are apparently in short

supply.

The Nature of the Existing Kuwaiti Supply Contract. According to

Platts Oilgram News, the Kuwait Petroleum Corp. refused to grant

KBR permission to deal with any other supplier than the Altanmia

Commercial Marketing Company to procure and deliver petroleum

products from Kuwait to Iraq. Altanmia’s main shareholder is

Najeeb al-Humaizi, part of a prominent Kuwait family closely linked

to the Kuwaiti government. Altanmia refuses to provide cost

information, contending it is prohibited from doing so by Kuwaiti

law.

Reacting to the fuel price controversy, the Pentagon decided, on December 30,

2003, to give the Iraqi fuel procurement job to the Defense Energy Support Center

(DESC). DESC solicited bids for 6.6 million barrels of fuel on January 21, 2004; a

contract is expected to be in place by April 1, 2004. KBR is also eligible to bid on

new contracts.

Meanwhile, KBR supplied fuel while being under investigation for wrongdoing

under the supply contract. The investigation continues, although no new

developments have been announced. The Pentagon Inspector General made a

preliminary finding that KBR had overcharged $61 million. On January 23, 2004, the

Wall Street Journal reported that two Halliburton employees had admitted taking $6

million in kickbacks.30 The company confirmed this. The Wall Street Journal went

on to note specifically, that the kickbacks did not involve the gasoline purchases

under scrutiny, although the employees involved worked in the same office in Kuwait

that handled the gasoline contract. The Defense Contract Audit Agency (DCAA) has

requested that the Inspector General findings be forwarded to Pentagon criminal

investigators.

From an e-mail communication with the U.S. Army Corps of Engineers, April 13, 2004.

King, Jr. Neil. “Halliburton Tells the Pentagon Workers Took Iraq-Deal Kickbacks.”

Wall Street Journal, Jan. 23, 2004, p. A1.

CRS-13

Have Halliburton/KBR Fuel Purchases Had an Undue Impact on the

Spot Market Price of Gasoline in the Persian Gulf Area? Between October

and December 2003, the spot market price of gasoline in the Persian Gulf area, as

quoted in Platts Oilgram Price Report, increased from 71 cents per gallon to over

$1.00 per gallon.31 Has this thinly traded spot market been unduly affected by

Halliburton/KBR fuel purchases? Spot market gasoline prices in the Persian Gulf

trading area have risen from about $30 per barrel at the beginning of October, 2003

to about $44 per barrel in mid-January 2004. That $14 increase — the equivalent of

33 cents per gallon — represents a substantial hike, well exceeding that which might

be attributable to crude oil increases.

Higher gasoline prices beyond increases in crude oil costs were likely caused by

increased demand in the limited regional market where fuel is purchased for Iraq.

After several months of unusual demand pressure from continuous short-term

purchases, markets have responded in a way suggesting that local conditions could

not support the Iraqi demand without escalating the cost of the Kuwait-Iraq

procurement. As DESC prepares to take over this program, one clear consideration

is to source future petroleum product purchases in more robust markets better able

to accommodate the greater demand without such price increase.

In a December 30, 2003, press release, DESC announced it would support the

Task Force-Restore Iraqi Oil (TF-RIO) through the Defense Logistics Agency.

Requests for Proposals (RFPs) were initiated, and supply contracts were signed. On

April 1, 2004, the DESC assumed sole responsibility for civilian fuel supplied to Iraq

and procured from both Turkey and Kuwait. Halliburton/KBR loaded its last truck

shipment in Kuwait on March 31, 2004, ending its involvement in fuel supply32.

Procuring New Contracts

Which Product Areas and Sectors Are the Focus of Future U.S.

Contracts? The Coalition Provisional Authority’s Program Management Office

has announced that, based on the awarding of over $5 billion during March 2004

alone, the United States has used up to approximately $8 billion of its 2004

supplemental appropriation for Iraqi reconstruction activities. Separate solicitations

from the Pentagon Renovation Program for program management support are also

anticipated. Table 2 and Table 3 provide information on CPA’s awarded

reconstruction contracts. The information from both tables was extracted from the

April 2, 2004, press release issued by CPA-PMO and can be viewed at

[http://www.rebuilding-iraq.net].

Landry, Cathy. “KBR Welcomes US Role in Iraq Fuel Supply.” Platts Oilgram News,

Jan. 7, 2004, p. 1.

From an E-mail communication with the Office of Legislative Affairs, Defense Logistics

Agency, April 15, 2004.

CRS-14

Table 2. FY2004 Contracts Awarded for Iraq Infrastructure

Reconstruction, by Sector

Sector

Contract Value

Date Awarded

Contractor

Public Works and

Water Projects

up to $600 million

March 11, 2004

Washington

International/Black

& Veatch Joint

Venture, Idaho

Public Works and

Water North,

Public Works and

Water South

North (up to $600

million) and South

(up to $500 million)

March 23, 2004

Fluor AMEC, LLC,

SC;Fluor, SC/Ca;

AMEC, United

Kingdom

Public Buildings,

Education, and

Health

up to $500 million

March 25, 2004

Parsons Delaware

Inc., Pasadena, CA

Buildings,

Education &

Health Sector

Program

Management

$10,754,664

March 10, 2004

Louis Berger

Group, Inc., Wash.,

DC; URS Group

Inc., CA

Public Works &

Water Sector

Program

Management

$28,494,672

March 10, 2004

CH2M Hill, CO;

Parsons Water

Infrastructure Inc.,

Electrical Power

Generation

up to $500 million

March 11, 2004

Fluor AMEC,

LLC,SC; Fluor,

SC/CA;

AMEC, United

Kingdom

Electrical Power

Distribution &

Transmission

North

up to $600 million

March 23, 2004

Washington

International Inc.,

Electrical Power

Distribution &

Transmission

South

up to $500 million

March 23, 2004

Perini Corp., MA

Electrical Power

Generation

$98,682,431

February 6,

2004

Fluor

Intercontinental, NC

Electrical Power

Generation

$33,078,193

February 6,

2004

Washington

International/Black

& Veatch

CRS-15

Sector

Contract Value

Date Awarded

Contractor

Electrical Power

Generation

$12,705,000

February 6,

2004

CH2MHill/Dragado

s/Soluziona,

Englewood, CO

Electrical Power

Transmission

$56,281,864

February 6,

2003

Fluor

Intercontinental

Electrical Power

Transmission

$51,409,080

February 27,

2004

Kellogg, Brown &

Root, VA

Electrical Services

Sector Program

Management

$43,361,340

March 10, 2004

Iraq Power Alliance

Joint Venture

Parsons Energy and

Checmicals Group,

PA; ParsonsBrickerhoff, Ltd.,

United Kingdom

Transportation

up to $325 million

March 23, 2004

Contrack/AICI/OCI/

Archirodon Joint

Venture, Arlington,

VA; Contrack,

Wash., DC; OCI,

Egypt; Archirodon

Joint Venture,

Netherlands;

Panama, United

Arab Emirates

Transportation &

Communications

Sector Program

Management

$8,458,350

March 10, 2004

Louis Berger

Group, Inc., Wash.,

DC; URS Group

Inc., CA

Communications

up to $75 million

March 23, 2004

Lucent

Technologies World

Services Inc., New

Jersey

Security, Justice,

and Safety

up to $900 million

March 26, 2004

Laguna

Construction

Company Inc.,

Laguna, New

Mexico

Security& Justice

Sector Program

Management

$8,458,350

March 10, 2004

Louis Berger Group

Inc., Wash., DC;

URS Group, Inc.,

CRS-16

Table 3. Other FY2004 Contracts Awarded for Iraq

Infrastructure Reconstruction

Contract

Contract Value

Date Awarded

Contractor

Iraq Infrastructure

up to $1.8 billion

January 6, 2004

Bechtel National

Inc., CA

Oil Infrastructure

North

up to $412 million

January 19, 2004

Parsons Texas,

USA, Worley

Group, Australia

Oil Infrastructure

South

up to $412 million

January 19, 2004

Kellogg, Brown &

Root, VA

Oil Sector Program

Management

$8,416,985

March 10, 2004

Foster Wheeler,

Co., United

Kingdom

Renovation of An

Numaniyah

Military Base

$65,449,155

January 22, 2004

Earth Tech Inc.,

Renovation of Taji

Military Base &

Recruiting Stations

$31,136,252

January 22, 2004

Parsons

Infrastructure &

Technology Group

Inc., CA

Renovation of Al

Kasik Military

Base

$75,749,910

January 22, 2004

Shaw

Environmental

Inc., LA

Renovation of

Umm Qasr Naval

Base

$16,279,724

January 22, 2004

Weston Solutions

Inc., PA

Program

Management

Office

$21,610,501

March 10, 2004

AECOM,

California

Ministry of

Defense Building

$19,536,683

March 26, 2004

Laguna

Construction

Company, Inc.

Laguna, NM

Work on Iraqi

Ports

$70,000,000

March 31, 2004

NANA Pacific,

Alaska

Source: Extracted from data provided under the “News and Business” section on the Iraq Program

Office website, at [http://www.rebuilding-iraq.net].

CRS-17

How Can U.S. Businesses Get Federal Government Contracts for

Work in Iraq? Businesses and producers may bid for contracts to supply specific

goods or services to the federal government. The General Services Administration

(GSA) defines a “contract” as a mutually binding legal relationship with the seller

furnishing the supplies or services and the buyer paying for them. A longer definition

of a contract is found in the Federal Acquisition Regulation (FAR 2.101), with the

full text of the regulations available at [http://www.arnet.gov/far].

A federal contract may be so large that a small business would have difficulty

in providing the products or services required to meet the terms of the contract. In

some cases, a prime contractor (the company that received the contract) may need to

use subcontractors (other companies) to fulfill the contractual obligations of the

required products or services of the original contract with the government. The

primary contractor may hire subcontractors and pay these companies for their

products or services in fulfillment of the contract. Iraq reconstruction prime

contractors are responsible for choosing their own subcontractors. Companies are

encouraged to access the contractors’ websites for information on needs and bid

requirements for subcontracting opportunities.

The Federal Business Opportunities (FedBizOpps) website is the single

government location for posting federal procurement opportunities over $25,000, at

[http://www.fedbizopps.gov]. Commercial vendors can search, monitor, and retrieve

information on solicitations posted by the entire federal contracting community.

Searches for contract information can be done under the button for “Find Business

Opportunities.” For example, a keyword search could be done for “Iraq.” The

searcher can select information on a contract award or a synopsis (a summary of a

solicitation). A more precise search for contract information could be done by

searching for a particular agency name, or for a product or service.

Aside from business opportunities with the federal government, there are other

kinds of business opportunities concerning Iraq, including the following: (1) CPA

and Iraqi Ministry solicitations; (2) working directly with Iraqi state-owned

enterprises; (3) international institutions, such as the World Bank, the United

Nations, and nongovernmental organizations; and (4) private enterprise.

For an overview of the contracts concerning Iraq, the Iraq Reconstruction Task

Force website provides a listing of contract awards at the website,

[http://www.export.gov/iraq/market_ops/contracts.html]. The tables list “Awarded

Contracts and Grants,” for Fiscal Years 2003 and 2004, with the names of the prime

contractors and known subcontractors. A brief summary describes the scope of the

contract and the country of the prime contractor that received the contract award.

Are There Additional Resources for Business Opportunities in

Iraq? The Iraq Investment and Reconstruction Task Force website also provides the

following resources:

“Business Guide for Iraq.” This frequently-updated document

discusses the following areas: (1) commercial environment in Iraq;

(2) existing laws and regulations; (3) international trade issues; and

(4) key industry sectors, including issues affecting agriculture, oil,

CRS-18

transportation, telecommunications, health, and energy sectors.

Information relating to these topics may be found at

[http://www.export.gov/iraq/bus_climate/businessguide_current.h

tml].

“Doing Business in Iraq FAQs.” This document answers questions

regarding the following areas: (1) travel and security concerns; (2)

health issues; (3) international trade and investment issues; (4) job

opportunities; and (5) business counseling by federal agencies.

Information relating to these topics may be found at

[http://export.gov/iraq/pdf/iraq_faq_current.pdf].

“IraqAlert.” A company can register to get email alerts on

commercial developments and potential opportunities in Iraq,

according to industry sectors or activities of interest. Information

relating to these topics may be found at [http://itaweb.ita.doc.gov/iraqreg].

For information on more business opportunities, the Iraq Investment and

Reconstruction Task Force website has links to other Iraq resources, including the

CPA-PMO, at [http://www.rebuilding-iraq.net]. This site encourages vendors to

reconstruction projects.

The Iraq Reconstruction Task Force at the Department of Commerce can be

contacted by telephone at the Iraq Business Outreach Hotline, Tel: 1-866-352-4727,

Fax: 1-202-482-0980, or email at IraqInfo@mail.doc.gov, or at the website,

[http://www.export.gov/iraq/].

For additional resources on exporting to Iraq, the website of the Export-Import

Bank of the United States (Ex-Im Bank) provides links to sources of information on

federal agencies, Iraqi organizations, and international organizations involved in Iraqi

activities, at [http://exim.gov/iraq.links.htm]. At this site, it is possible to register to

receive future notifications of export opportunities to Iraq.

Congressional Oversight

What Are the Potential Congressional Oversight Actions to Address

the Iraqi Contracting Situation? Both S. 2400, the proposed Department of

Defense FY2005 Authorization Bill for Military Construction and the Department

of Energy, and S. 2401, the proposed Department of Defense FY2005 Authorization

Bill, would require the Secretary of Defense to (1) submit to Congress a report

detailing a management and oversight plan covering contractor personnel who are

managed by federal government personnel; and (2) submit to the House and Senate

defense committees a report that outlines the rationale for and nature of the security,

intelligence, law enforcement, and criminal justice activities performed by

contractors in Iraq.

CRS-19

P.L. 108-136 (H.R. 1588, the FY2004 National Defense Authorization Act)

requires DOD to fully comply with the Competition in Contracting Act33 and other

applicable procurement laws and regulations for any contract awarded for

reconstruction activities in Iraq, and to conduct full and open competitions for such

contracts (Section 805), and to require public disclosure of any contracts for the

repair, maintenance, or construction of Iraq infrastructure that are awarded noncompetitively or without full and open competition (Section 1442). The House and

Senate Armed Services Committees, the Senate Foreign Relations Committee, the

House International Relations Committee, the House Government Reform

Committee, and the Senate Government Affairs Committee may play an oversight

role on Iraqi issues, including contracting concerns.

On January 20, 2004, Representative James Leach introduced H.Res. 494. This

resolution is a proposal to create a select committee to investigate the awarding and

carrying out of contracts to conduct activities in Afghanistan and Iraq and to fight the

war on terrorism. The measure was referred to the House Rules Committee.

P.L. 108-106 (H.R. 3289, the FY2004 Emergency Supplemental Appropriations

for Defense and for the reconstruction of Iraq and Afghanistan) created the position

of Inspector General, Coalition Provisional Authority (CPA-IG). Stuart W. Bowen,

Jr. was appointed as CPA-IG on January 20, 2004, and reports directly to the CPA

Administrator. Under P.L. 108-106 and the Inspector General Act of 1978 (P.L. 95452), the CPA-IG has statutory duties to promote economy, efficiency, and

effectiveness in managing CPA/Iraq reconstruction activities.

In addition, Section 2001 of P.L. 108-106 requires the CPA-IG to submit to

Congress quarterly reports on the activities of the Inspector General and the CPA.

The first report was submitted during March 2004. In this report, which covers the

first 70 days of his appointment, the CPA-IG has requested that future quarterly

reporting dates be changed to July 30, October 30, and January 30. The report can

be viewed at the CPA-IG’s website, located at [http://www.cpa-ig.org/].

Another bill that, if enacted, could potentially affect contracts for Iraqi

reconstruction activities was introduced in the House on October 8, 2003. H.R.

3275, the Clean Contracting in Iraq Act, would prohibit the awarding of sole-source

contracts unless the Director of the Office of Management and Budget (OMB)

approved a waiver under existing law; other provisions would required that larger

contracts would be awarded to a minimum of two different contractors, to promote

and ensure competition, and that each contracting agency could be required to

develop a plan to minimize costs, including the use of Iraqi contractors if lower in

costs. The measure, which has 25 co-sponsors, was referred to the House

Government Reform Committee.

10 U.S.C. 137.

CRS-20

For Additional Reading

CRS Report RL32017. Circular A-76 Revision 2003: Selected Issues.

CRS Report RS21489. OMB Circular A-76: Explanation and Discussion of the

Recently Revised Federal Outsourcing Policy.

CRS Report RL32079. Federal Contracting of Commercial Activities: Competitive

Sourcing Targets.

CRS Report RL31024. The Federal Activities Inventory Reform Act and Circular

A-76.

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