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Testimony: 

Before the Subcommittee on Defense, Committee on Appropriations, House 
of Representatives: 

United States Government Accountability Office: 

GAO: 

April 23, 2007: 

Stabilizing And Rebuilding Iraq: 

Conditions in Iraq Are Conducive to Fraud, Waste, and Abuse: 

Statement of David M. Walker: 
Comptroller General of the United States: 

A classified version of this statement was delivered to a closed 
session of the Subcommittee on Defense, Committee on Appropriations, 
House of Representatives on January 30, 2007. 

GAO-07-525T: 

Mr. Chairman and Members of the Subcommittee: 

I appreciate the opportunity to discuss some of the systemic conditions 
in Iraq that contribute to the fraud, waste, or abuse of U.S.-provided 
funds. Since 2003, DOD has reported total costs of about $257.5 billion 
for military operations in Iraq; these have increased from about $38.8 
billion in fiscal year 2003 to about $83.4 billion in fiscal year 2006. 
The largest increase has been in operation and maintenance expenses, 
including items such as support for housing, food, and services; the 
repair of equipment; and transportation of people, supplies and 
equipment. Many of the operation and maintenance expenses are for 
services. Other U.S. government agencies had reported obligations of 
$29 billion for Iraqi reconstruction and stabilization, as of October 
2006. These funds have been used for, among other things, 
infrastructure repair of the electricity, oil, water, and health 
sectors; training and equipping of the Iraqi security forces; and 
administrative expenses. 

My testimony today will focus on (1) security, (2) management and 
reporting of the program to train and equip Iraqi security forces, (3) 
contracting and contract management activities, and (4) Iraqi capacity 
and commitment to manage and fund reconstruction and security efforts. 

In preparing this testimony, we relied on previously issued GAO reports 
and testimonies on the security situation in Iraq, the training and 
equipping of Iraqi security forces, capacity of key Iraqi ministries, 
the management of contracts and contractors used to support deployed 
forces, and issues related to the reconstruction of Iraq. We performed 
our work in accordance with generally accepted government auditing 
standards. 

Summary: 

Despite U.S. and Iraqi efforts to shift a greater share of the 
country's defense on Iraqi forces, the security situation continues to 
deteriorate. Poor security conditions have hindered the management of 
the more than $29 billion that has been obligated for reconstruction 
and stabilization efforts since 2003. Although the State Department has 
reported that the number of Iraqi army and police forces that has been 
trained and equipped has increased from about 174,000 in July 2005 to 
about 323,000 in December 2006, overall security conditions in Iraq 
have deteriorated and grown more complex. For example, the average 
number of enemy attacks rose from about 70 per day in January 2006 to a 
record high of about 180 per day in October 2006, the single worst 
month on record. In December 2006, the attacks averaged about 160 per 
day. Sectarian and militia influences in Iraqi security forces have 
added to the violence. Collectively, these conditions have hindered 
efforts to engage with Iraqi partners and demonstrate the difficulty in 
making political and economic progress in the absence of adequate 
security conditions. 

Our ongoing work has identified weaknesses in the $15.4 billion program 
to support the development and sustainment of Iraqi security forces. 
Sectarian divisions have eroded the dependability of many Iraqi units, 
and a number of Iraqi units have refused to serve outside the areas 
where they were recruited. Corruption and infiltration by militias and 
others loyal to parties other than the Iraqi government have resulted 
in the Iraqi security forces being part of the problem in many areas 
instead of the solution. While unit-level transition readiness 
assessments (TRA) provide important information on Iraqi security force 
capabilities, the aggregate reports DOD provides to Congress based on 
these assessments do not provide adequate information to judge the 
capabilities of Iraqi forces. The DOD reports do not detail the 
adequacy of Iraqi security forces' manpower, equipment, logistical 
support, or training and may overstate the number of forces on duty. 
Congress will need additional information found in the TRAs to assess 
DOD's supplemental request for funds to train and equip Iraqi security 
forces. GAO has made repeated attempts to obtain U.S. assessments of 
Iraqi forces without success. These data are essential for Congress to 
undertake an independent and informed assessment of Iraqi forces' 
capabilities, funding needs, and results. Further, DOD and MNF-I may be 
unable to ensure that all of the equipment obtained for the Iraqis 
reached the intended recipients. It is also unclear what accountability 
measures DOD has applied to the train-and-equip program for Iraq. 

DOD's heavy reliance on contractors in Iraq, its long-standing contract 
and contract management problems, and poor security conditions provide 
opportunities for fraud, waste, and abuse. First, military commanders 
and senior DOD leaders do not have visibility over the total number of 
contractors who are supporting deployed forces in Iraq. As we have 
noted in the past, this limited visibility can unnecessarily increase 
costs to the government. For example, at a contractor accountability 
task force meeting we attended in 2006, an official from the Army 
Material Command noted that an Army official estimated that about $43 
million is lost every year on free meals provided to contractor 
employees who also receive per diem. Second, DOD lacks clear and 
comprehensive guidance and leadership for managing and overseeing 
contractors. In October 2005, DOD issued, for the first time, 
department-wide guidance on the use of contractors that support 
deployed forces. Although this guidance is a good first step, it does 
not address a number of problems we have repeatedly raised. In October 
2006, DOD established the office of the Assistant Deputy Under 
Secretary of Defense for Program Support to serve as the office with 
primary responsibility for contractor support issues. However, as we 
noted in our December 2006 report, it is not clear to what extent this 
office serves as the focal point dedicated to leading DOD's efforts to 
improve its contract management and oversight. Third, key contracting 
issues have prevented DOD from achieving successful acquisition 
outcomes. There has been an absence of well-defined requirements, and 
DOD has often entered into contract arrangements on reconstruction 
efforts and into contracts to support deployed forces that have posed 
additional risk to the government. Moreover, DOD does not have a 
sufficient number of oversight personnel, which precludes its ability 
to obtain reasonable assurance that contractors are meeting contract 
requirements efficiently and effectively at each location where work is 
being performed. Further, a lack of training hinders the ability of 
military commanders to adequately plan for the use of contractor 
support and inhibits the ability of contract oversight personnel to 
manage and oversee contracts and contractors in Iraq. 

Iraqi capacity and commitment to manage and fund reconstruction and 
security efforts remains limited. Since 2003, the United States has 
obligated about $29 billion to help Iraq rebuild its infrastructure and 
develop Iraqi security forces to stabilize the country. However, key 
goals have not been met. The Iraqi government has not sustained 
reconstruction and security efforts, in part because Iraqi government 
institutions are undeveloped and lack needed management and human 
resource skills according to U.S. officials. Key ministries face 
challenges in staffing a competent and non-partisan civil service, 
fighting corruption, and using modern technology. The inability of the 
Iraqi government to spend its 2006 capital budget also increases the 
uncertainty that it can sustain the rebuilding effort. 

Transferring Additional Security Responsibilities to the Iraqi 
Government Has Not Improved the Security Situation: 

Despite U.S. and Iraqi efforts to shift a greater share of the 
country's defense to the Iraqi security forces, the security situation 
continues to deteriorate, impeding management of the more than $29 
billion obligated for reconstruction and stabilization efforts. The 
desired end-state for U.S.-stabilization operations in Iraq is a 
peaceful, united, stable, and secure Iraq, well integrated into the 
international community, and a full partner in the global war on 
terrorism. To achieve this end-state, the United States is, among other 
things, (1) training and equipping Iraqi security forces that will be 
capable of leading counterinsurgency operations, and (2) transferring 
security responsibilities to Iraqi forces and the Iraqi government as 
capabilities improve. In October 2003, the multinational force outlined 
a multistep plan for transferring security missions to Iraqi security 
forces. The security transition plan had the objective of neutralizing 
Iraq's insurgency while developing Iraqi forces capable of securing 
their country, allowing a gradual decrease in the number of coalition 
forces. 

From the fall of 2003 through April 2006, MNF-I revised its security 
transition plan several times because the Iraqi government and security 
forces proved incapable of assuming security responsibilities within 
the time frames envisioned by the plans. For example, in April 2004, 
Iraqi police and military units performed poorly during an escalation 
of insurgent attacks against the coalition. Many Iraqi security forces 
around the country collapsed, with some units abandoning their posts 
and responsibilities and in some cases assisting the insurgency. 

State and DOD have reported some progress in implementing the security 
transition plan. The State Department has reported that the number of 
army and police forces that have been trained and equipped increased 
from about 174,000 in July 2005 to about 323,000 in December 2006. DOD 
and State also have reported progress in transferring security 
responsibilities to Iraqi army units and provincial governments. The 
number of Iraqi army battalions in the lead for counterinsurgency 
operations increased from 21 in March 2005 to 89 in October 2006. In 
addition, 7 Iraqi army division headquarters and 30 brigade 
headquarters had assumed the lead by December 2006. Moreover, by mid- 
December 2006, three provincial governments--Muthanna, Dhi Qar, and 
Najaf--had taken over security responsibilities for their provinces. 

However, the reported progress in transferring securing 
responsibilities to Iraq has not led to improved security conditions 
(see fig.1). Since June 2003, overall security conditions in Iraq have 
deteriorated and grown more complex, as evidenced by the increased 
numbers of attacks and the Sunni-Shi'a sectarian strife that followed 
the February 2006 bombing of the Golden Mosque in Samarra. Enemy- 
initiated attacks against the coalition and its Iraqi partners 
continued to increase through October 2006 and remain high. The average 
total attacks per day has increased, rising from about 70 per day in 
January 2006 to a record high of about 180 per day in October 2006. 
These attacks have increased around major religious and political 
events, including Ramadan and the elections. Coalition forces are still 
the primary target of attacks, but the number of attacks on Iraqi 
security forces and civilians also has increased since 2003. In October 
2006, the State Department reported that the recent increase in 
violence has hindered efforts to engage with Iraqi partners and 
illustrates the difficulty in making political and economic progress in 
the absence of adequate security conditions. 

Figure 1: Enemy-initiated Attacks Against the Coalition and Its Iraqi 
Partners: 

[See PDF for image] 

Sources: Multi-National Force-Iraq, Dec. 2006. 

[End of figure] 

Sectarian and militia influences in the Iraqi security forces 
contribute to the higher levels of violence. According to portions of 
the January 2007 National Intelligence Estimate on Iraq that were 
declassified, sectarian divisions have eroded the dependability of many 
Iraqi units, and a number of Iraqi units have refused to serve outside 
the areas where they were recruited. According to an August 2006 DOD 
report, sectarian lines among the Iraqi security forces are drawn 
geographically, with Sunni, Shi'a, or Kurdish soldiers serving 
primarily in units located in areas familiar to their group. Further, 
according to the report, commanders at the battalion level tend to 
command only soldiers of their own sectarian or regional background. 
Moreover, in November 2006, the State Department reported that 
corruption and infiltration by militias and others loyal to parties 
other than the Iraqi government have resulted in the Iraqi security 
forces being part of the problem in many areas instead of the solution. 

Because of the poor security conditions, the United States has not been 
able to draw down the number of U.S. forces in Iraq as early as 
planned. For example, after the increase in violence and collapse of 
the Iraqi security forces during the spring of 2004, DOD decided to 
maintain a force level of about 138,000 troops until at least the end 
of 2005, rather than reducing the number of troops to 105,000 by May 
2004, as had been announced the prior fall. DOD reversed a decision to 
significantly reduce the U.S. force level during the spring of 2006 
because Iraqi and coalition forces could not contain the rapidly 
escalating violence that occurred in the summer of 2006. 

DOD Faces Weaknesses in the Program to Develop Iraqi Security Forces: 

Our work has identified weaknesses in the $15.4 billion program to 
develop Iraqi security forces. Although unit-level transition readiness 
assessments provide detailed information on Iraqi security force 
capabilities, the aggregate reports that DOD and State provide to 
Congress do not provide the information needed to determine the 
complete capabilities of the forces. Consequently, Congress will need 
additional information to assess the department's supplemental request 
for $3.8 billion to train and equip Iraqi security forces. GAO has made 
repeated attempts, without success, to obtain U.S. assessments of Iraqi 
forces. These data are essential for Congress to make an independent 
assessment of Iraqi forces' capabilities, needs, and results. Moreover, 
DOD may be unable to fully account for weapons received by the Iraqi 
security forces and has yet to clarify which accountability 
requirements it chose to apply to the program. 

MNF-I uses the TRA system to determine when units of the Iraqi security 
forces are capable of assuming the lead for counterinsurgency 
operations in specific geographic areas. The TRA is a joint assessment, 
prepared monthly by the unit's coalition commander and Iraqi commander. 
According to MNF-I guidance, the purpose of the TRA system is to 
provide commanders with a method to consistently evaluate units; it 
also helps to identify factors hindering unit progress, determine 
resource shortfalls, and make resource allocation decisions. Iraqi army 
TRA reports contain capabilities ratings in the areas of personnel, 
command and control, equipment, sustainment/logistics, training, and 
leadership. Commanders use the TRA results and their professional 
judgment to determine a unit's overall readiness level. Each Iraqi army 
unit is assigned a readiness level of 1 through 4, with 1 the highest 
level a unit can achieve. 

DOD and State reports provide some information on the development of 
Iraqi security forces, but they do not provide detailed information on 
the specific capabilities that affect the readiness levels of 
individual units. For example, DOD and State provide Congress with 
weekly and quarterly reports on the progress made in developing capable 
Iraqi security forces and transferring security responsibilities to the 
Iraqi army and the Iraqi government. This information is provided in 
two key areas: (1) the number of trained and equipped forces, and (2) 
the number of Iraqi army units and provincial governments that have 
assumed responsibility for security of specific geographic areas. 

The State Department reports that the number of trained and equipped 
Iraqi security forces has increased from about 174,000 in July 2005 to 
about 323,000 in December 2006. However, these numbers do not provide a 
complete picture of the Iraqi security forces' capabilities in part 
because they may overstate the number of forces on duty. For example, 
Ministry of Interior data include police who are absent without leave, 
but Ministry of Defense data exclude absent personnel. In addition, 
poor reporting by the Ministry of Interior makes it difficult to 
determine how many of the coalition-trained police the ministry still 
employs or what percentage of the 180,000 police believed to be on the 
payroll are coalition trained and equipped. Moreover, the numbers do 
not give detailed information on the status of equipment, personnel, 
training, or leadership. 

We previously reported that we were working with DOD to obtain the unit-
level TRA reports because they would be useful in more fully informing 
Congress about the capabilities and needs of Iraq's security forces and 
in indicating how accurately DOD reports reflect the forces' 
capabilities[Footnote 1]. According to MNF-I's Deputy Chief of Staff 
for Strategic Effects, the best measure of the capabilities of Iraqi 
units and improvements in the security situation comes from commanders 
on the ground at the lowest level. Although unit-level TRA reports 
provide more detailed information on Iraqi security forces' 
capabilities, DOD had not provided GAO with these unit-level reports as 
of February 2007. DOD routinely provides GAO access to the readiness 
levels of U.S. forces. 

Additionally, DOD and MNF-I may be unable to fully account for weapons 
issued to the Iraqi security forces, and DOD has not yet clarified what 
accountability requirements apply to the program. According to our 
preliminary analysis, as of January 2007, DOD and MNF-I may not be able 
to account for Iraqi security forces' receipt of about 90,000 rifles 
and 80,000 pistols that were reported as issued before early October 
2005. Additionally, it is unclear at this time what accountability 
measures DOD has chosen to apply to the train-and-equip program for 
Iraq. As part of our ongoing work, we have asked DOD to clarify whether 
MNF-I and Multi-National Security Transition Command-Iraq (MNSTC-I) 
must follow accountability measures specified in DOD regulations, or 
whether DOD has established other accountability measures. For example, 
DOD officials expressed differing opinions on whether the DOD 
regulation on the Small Arms Serialization Program, which requires the 
entry of small arms serial numbers into a DOD-maintained registry, 
applies to U.S.-funded equipment procured for Iraqi security forces. 
While it is unclear which regulations DOD has chosen to apply, 
beginning in 2004, MNF-I established requirements to control and 
account for equipment issued to the Iraqi security forces by issuing a 
series of orders that outline procedures for its subordinate commands. 
Although MNF-I took initial steps to establish property accountability 
procedures, according to MNF-I officials limitations such as the 
initial lack of a fully operational equipment distribution network, 
staffing weaknesses, and the operational demands of equipping the Iraqi 
forces during war hindered its ability to fully execute critical tasks 
outlined in the property accountability orders. 

DOD Faces Challenges in Managing Contracts and Contractors in Iraq that 
Could Lead to Fraud, Waste, and Abuse: 

While DOD relies heavily on contractors for reconstruction projects and 
support to its forces in Iraq, it faces several management and 
oversight challenges. First, military commanders and senior DOD 
officials do not have visibility over contractors, which prevents DOD 
from knowing the extent to which it is relying on contractors for 
support in Iraq. Second, DOD lacks clear and comprehensive guidance and 
leadership for managing and overseeing contractors. Third, key 
contracting issues--including unclear requirements and not reaching 
agreement on key terms and conditions in a timely manner--have 
prevented DOD from achieving successful acquisition outcomes. Fourth, 
DOD does not have a sufficient number of oversight personnel to ensure 
that the contracts that are in place are carried out efficiently and 
according to the contract requirements. Finally, military commanders 
and contract oversight personnel do not receive sufficient training to 
effectively manage contracts and contractors in Iraq. 

Military Commanders and Senior DOD Leaders Need to Have Visibility Over 
the Contractors That Support Them: 

DOD continues to lack the capability to provide senior leaders and 
military commanders with information on the totality of contractor 
support to deployed forces. Without such visibility, senior leaders and 
military commanders cannot develop a complete picture of the extent to 
which they rely on contractors to support their operations. We first 
reported the need for better visibility in 2002 during a review of the 
costs associated with U.S. operations in the Balkans.[Footnote 2] At 
that time, we reported that DOD was unaware of (1) the number of 
contractors operating in the Balkans, (2) the tasks those contractors 
were contracted to do, and (3) the government's obligations to those 
contractors under the contracts. We noted a similar situation in 2003 
in our report on DOD's use of contractors to support deployed forces in 
Southwest Asia and Kosovo.[Footnote 3] At that time, we reported that, 
although most contract oversight personnel had visibility over the 
individual contracts for which they were directly responsible, 
visibility of all contractor support at a specific location was 
practically nonexistent at the combatant commands, component commands, 
and deployed locations we visited. As a result, commanders at deployed 
locations had limited visibility and understanding of all contractor 
activity supporting their operations and frequently had no easy way to 
get answers to questions about contractor support. This lack of 
visibility inhibited the ability of commanders to resolve issues 
associated with contractor support such as force protection issues and 
the provision of support to the contractor personnel. 

Most recently, in our December 2006 review of DOD's use of contractors 
in Iraq, we found that DOD's limited visibility unnecessarily increased 
contracting costs to the government and introduced unnecessary 
risk.[Footnote 4] Without visibility over where contractors are 
deployed and what government support they are entitled to, costs to the 
government may increase. For example, at a contractor accountability 
task force meeting we attended in 2006, an Army Material Command 
official stated that an Army official estimated that about $43 million 
is lost each year on free meals provided to contractor employees at 
deployed locations who also receive a per diem food allowance. Also, 
when senior military leaders began to develop a base consolidation 
plan, officials were unable to determine how many contractors were 
deployed and therefore ran the risk of over-or under-building the 
capacity of the consolidated bases. DOD's October 2005 guidance on 
contractor support to deployed forces included a requirement that the 
department develop or designate a joint database to maintain by-name 
accountability of contractors deploying with the force and a summary of 
the services or capabilities they provide. The Army has taken the lead 
in this effort, and DOD recently designated a database intended to 
provide improved visibility over contractors deployed to support the 
military in Iraq, Afghanistan, and elsewhere. 

DOD provided additional information after we briefed the House 
Appropriations Committee's Subcommittee on Defense. According to DOD, 
in January 2007, the department designated the Army's Synchronized 
Predeployment & Operational Tracker (SPOT) as the department-wide 
database to maintain by-name accountability of all contractors 
deploying with the force. According to DOD the SPOT database includes 
approximately 50,000 contractor names. Additionally in December 2006, 
the Defense Federal Acquisition Regulation Supplement was amended to 
require the use of the SPOT database by contractors supporting deployed 
forces. 

DOD Needs Clear and Comprehensive Guidance and Leadership to Manage and 
Oversee Contractors: 

Since the mid-1990s, our reports have highlighted the need for clear 
and comprehensive guidance for managing and overseeing the use of 
contractors who support deployed forces. For example, in assessing the 
Logistics Civil Augmentation Program (LOGCAP) implementation during the 
Bosnian peacekeeping mission in 1997, we identified weaknesses in the 
available doctrine on how to manage contractor resources, including how 
to integrate contractors with military units and what type of 
management and oversight structure to establish.[Footnote 5] We 
identified similar weaknesses when we began reviewing DOD's use of 
contractors in Iraq. For example, in 2003, we reported that guidance 
and other oversight mechanisms varied widely at the DOD, combatant- 
command, and service levels, making it difficult to manage contractors 
effectively.[Footnote 6] 

Similarly, in our 2005 report on private security contractors in Iraq, 
we noted that DOD had not issued any guidance to units deploying to 
Iraq on how to work with or coordinate efforts with private security 
contractors.[Footnote 7] Our prior work has shown that it is important 
for organizations to provide clear and complete guidance to those 
involved in program implementation. In our view, establishing baseline 
policies for managing and overseeing contractors would help ensure the 
efficient use of contractors in places such as Iraq. DOD took a 
noteworthy step to address some of these issues when it issued new 
guidance in 2005 on the use of contractors who support deployed forces. 
However, as our December 2006 report made clear, DOD's guidance does 
not address a number of problems we have repeatedly raised--such as the 
need to provide adequate contract oversight personnel, to collect and 
share lessons learned on the use of contractors supporting deployed 
forces, or to provide DOD commanders and contract oversight personnel 
with training on the use of contractors overseas before 
deployment.[Footnote 8] After our January 30, 2007 briefing to the 
House Appropriations Committee's Subcommittee on Defense, DOD provided 
additional information on a new publication it was developing. The 
department noted that it was developing a joint publication entitled 
"Contracting and Contractor Management in Joint Operations," which it 
expects to be distributed in May 2007. 

In addition to the lack of clear and comprehensive guidance for 
managing contract personnel, we have issued several reports 
highlighting the need for DOD components to comply with departmental 
guidance on the use of contractors. For example, in our June 2003 
report, we noted that DOD components were not complying with a long- 
standing requirement to identify essential services provided by 
contractors and develop backup plans to ensure the continuation of 
those services during contingency operations should contractors become 
unavailable to provide those essential services. We believe that risk 
is inherent when relying on contractors to support deployed forces, and 
without a clear understanding of the potential consequences of not 
having the essential service available, the risks associated with the 
mission increase. 

In other reports, we highlighted our concerns over DOD's planning for 
the use of contractor support in Iraq--including the need to comply 
with guidance to identify operational requirements early in the 
planning process.[Footnote 9] When contractors are involved in planning 
efforts early and given adequate time to plan and prepare to accomplish 
their assigned missions, the quality of the contractor's services 
improves and contract costs may be lowered. DOD's October 2005 guidance 
on the use of contractor support to deployed forces went a long way to 
consolidate existing policy and provide guidance on a wide range of 
contractor issues. However, as of December 2006, we found little 
evidence that DOD components were implementing that guidance, in part 
because no individual within DOD was responsible for reviewing DOD and 
service efforts to ensure that the guidance was being consistently 
implemented. 

We have made a number of recommendations for DOD to take steps to 
establish clear leadership and accountability for contractor support 
issues. For example, in our 2005 report on LOGCAP, we recommended that 
DOD designate a LOGCAP coordinator with the authority to participate in 
deliberations and advocate for the most effective and efficient use of 
the LOGCAP contract. Similarly, in our second comprehensive review of 
contractors on the battlefield in 2006, we recommended that DOD appoint 
a focal point within the Office of the Under Secretary of Defense for 
Acquisition, Technology, and Logistics--at a sufficiently senior level 
and with the appropriate resources--to lead DOD's efforts to improve 
its contract management and oversight. DOD generally agreed with these 
recommendations. In October 2006, DOD established the office of the 
Assistant Deputy Under Secretary of Defense for Program Support to 
serve as the office of primary responsibility for contractor support 
issues. However, as we noted in our December 2006 report, it is not 
clear to what extent this office would serve as the focal point 
dedicated to leading DOD's efforts to improve its contract management 
and oversight. 

DOD Needs to Address Key Contracting Issues to Promote Successful 
Acquisition Outcomes: 

DOD needs to address long-standing contracting issues related to 
acquisition outcomes. Two of the key factors that promote successful 
acquisition outcomes are (1) clearly defined requirements and (2) 
timely agreement on a contract's key terms and conditions, such as the 
scope and cost. The absence of well-defined requirements and clearly 
understood objectives complicates efforts to hold DOD and contractors 
accountable for poor acquisition outcomes. 

Further, in Iraq, DOD's contracts were often cost-reimbursable 
contracts, which allow the contractor to be reimbursed for reasonable, 
allowable, and allocable costs to the extent prescribed in the 
contracts. When cost-reimbursable contracts such as those used in the 
reconstruction of Iraq and the support contracts for deployed forces 
(e.g. LOGCAP) are not effectively managed and given sufficient 
oversight, the government's risk is likely to increase. For example, we 
have reported that poorly written statements of work, which included 
vague or ill-defined requirements, can lead the contractor to take 
excessive steps to ensure customer satisfaction and result in 
additional costs to the government. Similarly, we have reported that 
contract customers need to conduct periodic reviews of services 
provided under cost-reimbursable contracts to ensure that services 
provided are supplied at an appropriate level. Without such a review, 
the government is at risk of paying for services it no longer needs. 
For example, the command in Iraq lowered the cost of the LOGCAP 
contract by $108 million dollars by reducing services and eliminating 
unneeded dining facilities and laundries. 

A prerequisite to achieving good acquisition outcomes is a match 
between well-defined requirements and available resources. U.S. 
reconstruction goals were based on assumptions about the money and time 
needed, which have proven unfounded. U.S. funding was not meant to 
rebuild Iraq's entire infrastructure but rather to lay the groundwork 
for a longer-term reconstruction effort that anticipated significant 
assistance from international donors. 

To provide that foundation, the Coalition Provisional Authority (CPA) 
allocated $18.4 billion in fiscal year 2004 reconstruction funds among 
various projects in each reconstruction sector, such as oil, 
electricity, and water and sanitation.[Footnote 10] Almost immediately 
after the CPA dissolved, the Department of State reprioritized funding 
for projects that would not begin until mid to late 2005 and used those 
funds to target high-impact projects. By July 2005, the State 
Department had conducted a series of funding reallocations to address 
new priorities, including increasing support for security and law 
enforcement efforts and oil infrastructure enhancements. One of the 
consequences of these reallocations was to reduce funding for the water 
and sanitation sector by about 44 percent, from $4.6 billion to $2.6 
billion. One reallocation of $1.9 billion in September 2004 led the 
Project and Contracting Office to cancel some projects, most of which 
were planned to start in mid-2005. Changes, even those made for good 
reasons, make it more difficult to manage individual projects to 
successful outcomes. 

Further, such changes invariably have a cascading effect on individual 
contracts. To produce desired outcomes within available funding and 
required time frames, DOD and its contractors need to have a clear 
understanding of reconstruction objectives and how they translate into 
the terms and conditions of a contract: what goods or services are 
needed, when they are needed, the level of performance or quality 
desired, and what the cost will be. When such requirements were not 
clear, DOD often entered into contract arrangements on reconstruction 
efforts that posed additional risks, such as authorizing contractors to 
begin work before key terms, conditions such as the work to be 
performed, and projected costs were fully defined.[Footnote 11] For 
example, we found that, as of March 2004, about $1.8 billion had been 
obligated on reconstruction contract actions without DOD and the 
contractors reaching an agreement on the final scope and cost of the 
work. 

In September 2006, we issued a report on how DOD addressed issues 
raised by the Defense Contract Audit Agency (DCAA) in its audits of 
Iraq-related contract costs.[Footnote 12] We noted that, in cases where 
DOD authorized contractors to begin work before reaching agreement on 
the scope or price, DOD contracting officials were less likely to 
remove costs from a contractor's proposal when DCAA raised questions 
about them if the contractor had already incurred those costs. For 
example, of the 18 audit reports we reviewed, DCAA issued 11 reports on 
contract actions where more than 180 days had elapsed between the 
beginning of the period of performance to final negotiations. For nine 
of these audits, the period of performance DOD initially authorized for 
each contract action concluded before final negotiations took place. In 
one case, DCAA questioned $84 million in its audit of a task order 
proposal for an oil mission. In this case, the contractor did not 
submit a proposal to DOD until a year after the work was authorized, 
and DOD and the contractor did not negotiate the final terms of the 
task order until more than a year after the contractor had completed 
the work. In the final negotiation documentation, the DOD contracting 
official stated that the payment of incurred costs is required for cost-
type contracts, if there are no unusual circumstances. In contrast, in 
the few audit reports we reviewed in which the government negotiated 
the terms before starting work, we found that the portion of questioned 
costs removed from the proposal was substantial. 

DOD Needs Sufficient Contract Oversight Personnel to Ensure that 
Contract Requirements Are Met Effectively and Efficiently: 

An unstable contracting environment--when contract requirements are in 
a state of flux--requires greater attention to oversight, which in turn 
relies on a capable government workforce. Having personnel who are 
trained to conduct oversight and held accountable for their oversight 
responsibilities is essential for effective oversight of contractors. 
If surveillance is not conducted, not sufficient, or not well 
documented, DOD is at risk of being unable to identify and correct poor 
contractor performance in a timely manner and potentially paying too 
much for the services it receives. 

On multiple occasions, we and others have reported on deficiencies in 
DOD's oversight. For example, our June 2004 report found that early 
contract administration challenges were caused, in part, by the lack of 
personnel.[Footnote 13] In addition, the Special Inspector General 
noted that, with regard to the CPA, gaps existed in the experience 
levels of those hired and the quality and depth of their experiences 
relative to their assigned jobs. Similarly, in 2004, an interagency 
assessment team found that the number of contracting personnel was 
insufficient to handle the increased workload. In part, the CPA's 
decision to award seven contracts in early 2004 to help better 
coordinate and manage the fiscal year 2004 reconstruction efforts 
recognized this shortfall. As a result, DOD is in the position of 
relying on contractors to help manage and oversee the work of other 
contractors. 

More recently, in December 2006, we reported that DOD does not have 
sufficient numbers of contractor oversight personnel at deployed 
locations, which limits its ability to obtain a reasonable assurance 
that contractors are meeting contract requirements efficiently and 
effectively.[Footnote 14] Although we could find no DOD guidelines on 
the appropriate number of personnel needed to oversee and manage DOD 
contracts at a deployed location, several contract oversight personnel 
stated that DOD does not have adequate personnel at deployed locations 
to effectively oversee and manage contractors. For example, an Army 
official acknowledged that the Army is struggling to find the capacity 
and expertise to provide the contracting support needed in Iraq. In 
addition, officials responsible for contracting with MNF-I stated that 
they did not have enough contract oversight personnel and quality 
assurance representatives to allow MNF-I to reduce the Army's use of 
the LOGCAP contract by awarding more sustainment contracts for base 
operations support in Iraq. Furthermore, a LOGCAP program official 
noted that, if adequate staffing had been in place, the Army could have 
realized substantial savings on the LOGCAP contract through more 
effective reviews of new requirements. Finally, the contracting 
officer's representative for an intelligence support contract in Iraq 
stated that he was also unable to visit all of the locations that he 
was responsible for overseeing. At the locations he did visit, he was 
able to work with the contractor to improve the project's efficiency. 
However, because he was not able to visit all of the locations at which 
the contractor provided services in Iraq, he was unable to duplicate 
those efficiencies at all the locations in Iraq where the contractor 
provided support. 

The inability of contract oversight personnel to visit all the 
locations they are responsible for can also create problems for units 
that face difficulties resolving contractor performance issues at those 
locations. For example, officials from a brigade support battalion 
stated that they had several concerns with the performance of a 
contractor that provided maintenance for the brigade's mine-clearing 
equipment. These concerns included delays in obtaining spare parts and 
a disagreement over the contractor's obligation to provide support in 
more austere locations in Iraq. According to the officials, their 
efforts to resolve these problems in a timely manner were hindered 
because the contracting officer's representative was located in Baghdad 
while the unit was stationed in western Iraq. In other instances, some 
contract oversight personnel may not even reside within the theater of 
operations. For example, we found the Defense Contract Management 
Agency's (DCMA) legal personnel responsible for LOGCAP in Iraq were 
stationed in Germany, while other LOGCAP contract oversight personnel 
were stationed in the United States. According to a senior DCMA 
official in Iraq, relying on support from contract oversight personnel 
outside the theater of operations makes resolving contractor 
performance issues more difficult for military commanders in Iraq, who 
are operating under the demands and higher operational tempo of a 
contingency operation in a deployed location. 

Better Training of Military Commanders and Contract Oversight Personnel 
Is Essential: 

Since the mid-1990s, our work has shown the need for better pre- 
deployment training for military commanders and contract oversight 
personnel on the use of contractor support. Training is essential for 
military commanders because of their responsibility for identifying and 
validating requirements to be addressed by the contractor. In addition, 
commanders are responsible for evaluating the contractor's performance 
and ensuring the contract is used economically and efficiently. 
Similarly, training is essential for DOD contract oversight personnel 
who monitor the contractor's performance for the contracting officer. 

As we reported in 2003, military commanders and contract management and 
oversight personnel we met in the Balkans and throughout Southwest Asia 
frequently cited the need for better preparatory training.[Footnote 15] 
Additionally, in our 2004 review of logistics support contracts, we 
reported that many individuals using logistics support contracts such 
as LOGCAP were unaware that they had any contract management or 
oversight roles.[Footnote 16] Army customers stated that they knew 
nothing about LOGCAP before their deployment and that they had received 
no pre-deployment training regarding their roles and responsibilities 
in ensuring that the contract was used economically and efficiently. In 
our December 2006 report, we noted that many officials responsible for 
contract management and oversight in Iraq stated that they received 
little or no training on the use of contractors prior to their 
deployment, which led to confusion over their roles and 
responsibilities.[Footnote 17] For example, in several instances, 
military commanders attempted to direct (or ran the risk of directing) 
a contractor to perform work outside the contract's scope, even though 
commanders are not authorized to do so. Such cases can result in 
increased costs to the government. 

Over the years, we have made several recommendations to DOD intended to 
strengthen this training. Some of our recommendations were aimed at 
improving the training of military personnel on the use of contractor 
support at deployed locations, while others focused on training 
regarding specific contracts, such as LOGCAP. Our recommendations have 
sought to ensure that military personnel deploying overseas have a 
clear understanding of the role of contractors and the support the 
military provides to them. DOD has agreed with most of our 
recommendations. However, we continue to find little evidence that DOD 
has improved training for military personnel on the use of contractors 
prior to their deployment. 

DOD provided additional information after we briefed the House 
Appropriations Committee's Subcommittee on Defense. DOD advised us that 
they had established a contingency contracting training program at the 
Defense Acquisition University. While this is a good first step, we 
would note that according to the course description, the course is 
intended for contracting professionals. As we noted, we believe that 
there is a need to provide training for those personnel who are not 
contracting professionals such as commanders and others who are likely 
to work with contractor employees on a daily bases, but are not 
contracting professionals. 

The Iraqi Government Currently Lacks the Capacity to Sustain and 
Continue Reconstruction and Security Efforts: 

Since 2003, the United States has obligated about $29 billion to help 
Iraq rebuild its infrastructure and develop Iraqi security forces to 
stabilize the country. However, key goals have not been met and the 
Iraqi government has not sustained these efforts, in part because of 
the lack of management and human resource skills in Iraq's key 
ministries. According to U.S. officials, the inability of the Iraqi 
government to spend its 2006 capital budget also increases the 
uncertainty that it can sustain the rebuilding effort. 

Iraq Has Difficulty Sustaining the Billions of Dollars Invested in 
Infrastructure and Security: 

The United States has obligated about $14 billion to restore essential 
services such as oil, electricity, and water, and more than $15 billion 
to train, equip, and sustain Iraqi security forces. Reconstruction has 
focused on projects such as repairing oil facilities, increasing 
electricity generating capacity, and restoring water treatment plants. 
For example, the U.S. Army Corps of Engineers reported that it had 
completed 293 of 523 planned electrical projects, including the 
installation of 35 natural gas turbines in Iraqi power generation 
plants. Stabilization efforts have focused on MNF-I training and 
equipping approximately 323,000 Iraqi security forces. To help sustain 
these forces, MNF-I is assisting Iraq's Ministries of Defense and 
Interior in funding and building logistics systems for the military and 
police. The military logistics system includes a national depot, 
regional logistics centers, and garrison support units. The draft 
logistics plan for the police called for a system of warehouses to 
perform maintenance on equipment and distribution centers to dispense 
supplies. 

The United States has spent billions of dollars rebuilding the 
infrastructure and developing Iraqi security forces. However, the Iraqi 
government has had difficulty operating and sustaining the aging oil 
infrastructure, maintaining the new and rehabilitated power generation 
facilities, and developing and sustaining the logistics systems for the 
Ministries of Defense and Interior. The coalition provides the critical 
support necessary for the ministries to carry out their security 
responsibilities. As of December 2006, neither ministry was self- 
sufficient in logistics, command and control, or intelligence. For 
example: 

* Iraq's oil production and exports have consistently fallen below 
their respective program goals. In 2006, oil production averaged 2.1 
million barrels per day, compared with the U.S. goal of 3.0 million 
barrels per day. The Ministry of Oil has had difficulty operating and 
maintaining the refineries. According to U.S. officials, Iraq lacks 
qualified staff and expertise at the field, plant, and ministry level, 
as well as an effective inventory control system for spare parts. 
According to State, the Ministry of Oil will have difficulty 
maintaining future production levels unless it initiates an ambitious 
rehabilitation program. In addition, oil smuggling and theft of refined 
oil products have cost Iraq substantial resources. 

* In 2006, electrical output reached 4,317 megawatts of peak generation 
per day, falling short of the U.S. goal of 6,000 megawatts. Prewar 
electrical output averaged 4,200 megawatts per day. Production also was 
outpaced by increasing demand, which has averaged about 8,210 megawatts 
per day. The Iraqi government has had difficulty sustaining the 
existing facilities. Problems include the lack of training, inadequate 
spare parts, and an ineffective asset management and parts inventory 
system. Moreover, plants are sometimes operated beyond their 
recommended limits, resulting in longer downtimes for maintenance. In 
addition, major transmission lines have been repeatedly sabotaged and 
repair workers have been intimidated by anti-Iraqi forces. 

* As of December 2006, the coalition was providing significant levels 
of support to the Iraqi military because the Ministry of Defense could 
not fully supply its forces with adequate life support, fuel, uniforms, 
building supplies, ammunition, vehicle maintenance and spare parts, or 
medical supplies. In addition, the ministry was not able to run its 
communications networks on its own or independently acquire 
communications equipment. Furthermore, the Ministry will likely lack a 
comprehensive plan for its intelligence structure until December 2007. 
Although the coalition plans to begin turning over certain support 
functions to ministerial control in the spring of 2007, it is unlikely 
that the Ministry of Defense will achieve complete self-sufficiency in 
logistics, command and control, or intelligence before mid-2008. 

* The Ministry of Interior also receives critical support from the 
coalition and is not self-sufficient in logistics, command and control, 
or intelligence. Because the ministry is unable to provide maintenance 
for vehicles of the national police, the coalition has let several 
contracts to train Iraqi mechanics, provide spare parts to contractors, 
and repair police vehicles. In addition, the ministry is not able to 
self-sufficiently operate or maintain its communications networks. 
Furthermore, the coalition estimates that, if the security environment 
in Baghdad improves, the ministry's intelligence organization will be 
self-sufficient by mid-2008. However, if this self-sufficiency depends 
on improved security, there may be cause for concern, given that the 
average total attacks per day have increased, rising from about 70 per 
day in January 2006 to a record high of about 180 per day in October 
2006. Although the coalition plans to begin turning over certain 
support functions to ministerial control in the spring of 2007, it is 
unlikely that the Ministry of Interior will achieve complete self- 
sufficiency in logistics, command and control, or intelligence before 
mid 2008. 

The Iraqi Government Faces Critical Challenges Staffing Effective Civil 
Service, Fighting Corruption, and Managing Resources: 

Iraqi government institutions are undeveloped and confront significant 
challenges in staffing a competent, non-partisan civil service; 
effectively fighting corruption; using modern technology; and managing 
resources effectively. Figure 2 provides an organizational chart of the 
Iraqi executive branch and ministries. 

Figure 2: Iraqi Executive Branch and Ministries: 

[See PDF for image] 

Source: State Department. 

[End of figure] 

The Iraqi civil service remains hampered by inadequately trained or 
unskilled staff whose political and sectarian loyalties jeopardize the 
ministries' ability to provide basic services and build credibility 
among Iraqi citizens, according to U.S. government reports and 
international assessments. A U.S. report states that the government 
ministries and the associated budgets are used as sources of power for 
political parties with ministry positions staffed with party cronies as 
a reward for political loyalty.[Footnote 18] According to U.S. 
officials, patronage leads to staff instability as many are replaced 
when the government changes or a new minister is named. Some Iraqi 
ministries, including the Ministries of Interior, Agriculture, Health, 
Transportation, and Tourism, are led by ministers whose allegiance is 
to political parties hostile to U.S. goals. These ministers use their 
positions to pursue partisan agendas that conflict with the goal of 
building a government that represents all ethnic groups. U.S. officials 
have expressed reservations about working in some of these ministries, 
noting that the effectiveness of programs is hampered by the presence 
of unresponsive or anti-U.S. officials. 

Corruption in Iraq is reportedly widespread and also poses a major 
challenge to building an effective Iraqi government. Corruption 
jeopardizes future flows of needed international assistance and 
reportedly undermines the government's ability to make effective use of 
current reconstruction assistance. According to U.S. government and 
World Bank reports, there are several reasons for corruption in Iraq. 
The reasons, among others, include (1) an ineffective banking system 
that leaves the government dependent on cash transactions; (2) 
nontransparent, obsolete ministry procurement systems; and (3) 
ineffective, inadequately resourced accountability institutions, such 
as the ministries' inspectors general. 

GAO and the inspectors general are working with Iraq's accountability 
organizations--the Board of Supreme Audit, Commission on Public 
Integrity, and inspectors general of the ministries--to strengthen 
their capabilities. 

The Iraqi ministries lack adequate information technology and have 
difficulty managing their resources, according to U.S. officials and an 
international assessment, further contributing to the corruption 
problem. For example, U.S. officials said that the Ministry of Interior 
relies on manual processes such as hand-written ledgers and a cash- 
based payroll system that has resulted in Iraqi police leaving their 
posts to deliver cash to their families. U.S. officials also estimated 
that 20 to 30 percent of the Ministry of Interior personnel are "ghost 
employees"--nonexistent staff paid salaries that are collected by other 
officials. 

Inability of Iraq's Ministries to Spend the 2006 Capital Budget Creates 
Further Uncertainty about Sustaining Efforts: 

Sound government budgeting practices can help determine the priorities 
of the new government, provide transparency on government operations, 
and help decision makers weigh competing demands for limited resources. 
However, unclear budgeting and procurement rules have affected Iraq's 
efforts to spend capital budgets effectively and efficiently according, 
to U.S. officials. The inability to spend the money raises serious 
questions for the government, which has to demonstrate to skeptical 
citizens that it can improve basic services and make a difference in 
their daily lives. The U.S. government has launched a series of 
initiatives in conjunction with other donors to address this issue and 
improve the Iraqi government's budget execution. 

As of August 2006, the government of Iraq had spent, on average, 8 
percent of its annual capital goods budget and 14 percent of its annual 
capital projects budget.[Footnote 19] Some of the weakest spending 
occurs at the Ministry of Oil, which relies on damaged and outdated 
infrastructure to produce the oil that provides nearly all of the 
country's revenues. The Ministry of Oil's $3.5 billion 2006 capital 
project's budget targeted key enhancements to the country's oil 
production, distribution, and export facilities. However, as of August 
2006, the ministry had spent less than 1 percent of these budgeted 
funds. Moreover, Interior and Defense had only spent about 11 and 1 
percent, respectively, of their capital goods budget, which include 
funds for the purchase of weapons, ammunition, and vehicles, among 
other items. According to U.S. officials, Iraq lacks clearly defined 
and consistently applied budget and procurement rules needed for 
effective budget planning and implementation. The ministries have 
multiple rules and regulations promulgated under the former regime, the 
CPA, and the current government. The lack of procurement and budgeting 
rules creates opportunities for corruption and mismanagement. Table 1 
provides further information on the Iraqi ministries efforts to spend 
their capital budgets. 

Table 1: 2006 Annual Iraq Budget and Actual Expenditures through August 
2006: 

Millions of dollars.

Ministry: Finance; 
2006 Annual Budget: Capital goods: $10; 
2006 Annual Budget: Capital projects: $33; 
2006 Annual Budget: Total budget: $16,506; 
Expenditures through August 2006: Capital goods: $1; 
Expenditures through August 2006: Capital projects: $74; 
Expenditures through August 2006: Total budget: $8,895. 

Ministry: Planning; 
2006 Annual Budget: Capital goods: 4; 
2006 Annual Budget: Capital projects: 27; 
2006 Annual Budget: Total budget: 55; 
Expenditures through August 2006: Capital goods: 0.4; 
Expenditures through August 2006: Capital projects: 3; 
Expenditures through August 2006: Total budget: 9. 

Ministry: Interior; 
2006 Annual Budget: Capital goods: 233; 
2006 Annual Budget: Capital projects: 27; 
2006 Annual Budget: Total budget: 1,919; 
Expenditures through August 2006: Capital goods: 25; 
Expenditures through August 2006: Capital projects: 0.2; 
Expenditures through August 2006: Total budget: 958. 

Ministry: Defense; 
2006 Annual Budget: Capital goods: 864; 
2006 Annual Budget: Capital projects: 33; 
2006 Annual Budget: Total budget: 3,443; 
Expenditures through August 2006: Capital goods: 12; 
Expenditures through August 2006: Capital projects: 0.0; 
Expenditures through August 2006: Total budget: 831. 

Ministry: Oil; 
2006 Annual Budget: Capital goods: 2; 
2006 Annual Budget: Capital projects: 3,533; 
2006 Annual Budget: Total budget: 3,590; 
Expenditures through August 2006: Capital goods: 0.4; 
Expenditures through August 2006: Capital projects: 4; 
Expenditures through August 2006: Total budget: 40. 

Ministry: Electricity; 
2006 Annual Budget: Capital goods: 4; 
2006 Annual Budget: Capital projects: 767; 
2006 Annual Budget: Total budget: 840; 
Expenditures through August 2006: Capital goods: 0.3; 
Expenditures through August 2006: Capital projects: 267; 
Expenditures through August 2006: Total budget: 279. 

Ministry: Water; 
2006 Annual Budget: Capital goods: 0.2; 
2006 Annual Budget: Capital projects: 200; 
2006 Annual Budget: Total budget: 259; 
Expenditures through August 2006: Capital goods: 0.0; 
Expenditures through August 2006: Capital projects: 49; 
Expenditures through August 2006: Total budget: 78. 

Ministry: Justice; 
2006 Annual Budget: Capital goods: 3; 
2006 Annual Budget: Capital projects: 10; 
2006 Annual Budget: Total budget: 74; 
Expenditures through August 2006: Capital goods: 2; 
Expenditures through August 2006: Capital projects: 0.2; 
Expenditures through August 2006: Total budget: 34. 

Ministry: Others; 
2006 Annual Budget: Capital goods: 272; 
2006 Annual Budget: Capital projects: 1,552; 
2006 Annual Budget: Total budget: 7,290; 
Expenditures through August 2006: Capital goods: 77; 
Expenditures through August 2006: Capital projects: 480; 
Expenditures through August 2006: Total budget: 3,501. 

Total; 
2006 Annual Budget: Capital goods: $1,392; 
2006 Annual Budget: Capital projects: $6,181; 
2006 Annual Budget: Total budget: $33,975; 
Expenditures through August 2006: Capital goods: $117 (8.4%); 
Expenditures through August 2006: Capital projects: $877; (14.2%); 
Expenditures through August 2006: Total budget: $14,623; (43.0%). 

Source: GAO analysis of Iraqi budget data. 

[End of table] 

Concluding Observations: 

As I have discussed in my statement today, a number of conditions exist 
in Iraq that have led or will lead to fraud, waste, and abuse of U.S 
funds and will affect the U.S. effort to achieve our security, 
economic, and diplomatic goals in Iraq. Addressing these problems will 
require complete and transparent information on the progress made to 
reasonably judge our past efforts and determine future directions. This 
includes more accurate, reliable, and comprehensive information on the 
cost of the war, the capabilities of Iraqi security forces, and the 
results of U.S. efforts to build the managerial capacity of the Iraqi 
ministries. 

Furthermore, given DOD's heavy and increasing reliance on contractors 
in Iraq and elsewhere, and the risks this reliance entails, it may be 
appropriate to ask if DOD has become too reliant on contractors to 
provide essential services. Moreover, given the pace of activities 
during contingency operations, it is essential that DOD and other 
government agencies engage, as early as possible, in (1) identifying 
potential support requirements, (2) locating contractors capable of 
providing support and negotiating with contractors to provide this 
support in a timely and cost-effective manner, and (3) planning for 
additional military and civilian personnel to oversee and manage this 
increase in contractor activities. 

Mr. Chairman and members of the committee, this concludes my statement. 
I will be happy to answer any questions you may have. 

Contact and Acknowledgments: 

For questions regarding this testimony, please call Joseph A. 
Christoff, Director, International Affairs and Trade, at (202) 512- 
8979; John Hutton, Acting Director, Acquisition and Sourcing 
Management, at (202) 512-4841; or William Solis, Director, Defense 
Capabilities and Management, at (202) 512-8365. 

Other key contributors to this statement Nanette Barton, Dan Cain, 
Carole Coffey, Allisa Czyz, Tim DiNapoli, Mattias Fenton, Whitney 
Havens, Patrick Hickey, Wesley Johnson, Hynek Kalkus, Judy McCloskey, 
Tet Miyabara, James A. Reynolds, Chris Turner, and Marilyn Wasleski. 

FOOTNOTES 

[1] GAO, Stabilizing Iraq: An Assessment of the Security Situation, GAO-
06-1094T (Washington, D.C.: Sept. 11, 2006). 

[2] GAO, Defense Budget: Need to Strengthen Guidance and Oversight of 
Contingency Operations Costs, GAO-02-450 (Washington, D.C.: May 21, 
2002). 

[3] GAO, Military Operations: Contractors Provide Vital Services to 
Deployed Forces but Are Not Adequately Addressed in DOD Plans, GAO-03-
695 (Washington, D.C.: June 24, 2003). 

[4] GAO, Military Operations: High-Level DOD Action Needed to Address 
Long-standing Problems with Management and Oversight of Contractors 
Supporting Deployed Forces, GAO-07-145 (Washington, D.C.: Dec. 18, 
2006). 

[5] GAO, Contingency Operations: Opportunities to Improve the Logistics 
Civil Augmentation Program, GAO/NSIAD-97-63 (Washington, D.C.: Feb. 11, 
1997). 

[6] GAO-03-695. 

[7] GAO, Rebuilding Iraq: Actions Needed to Improve Use of Private 
Security Providers, GAO-05-737 (Washington, D.C.: July 28, 2005). 

[8] GAO-07-145. 

[9] GAO, Military Operations: DOD's Extensive Use of Logistics Support 
Contracts Requires Strengthened Oversight, GAO-04-854 (Washington, 
D.C.: July 19, 2004). 

[10] From April 2003 to June 28, 2004, the CPA served as Iraq's interim 
government and was responsible for overseeing, directing, coordinating, 
and approving rebuilding efforts. With the establishment of Iraq's 
interim government, the CPA ceased to exist and its responsibilities 
were transferred to the Iraqi government or to other U.S. agencies. The 
Department of State is now responsible for overseeing U.S. efforts to 
rebuild Iraq. 

[11] GAO, Rebuilding Iraq: Fiscal Year 2003 Contract Award Procedures 
and Management Challenges, GAO-04-605 (Washington, D.C.: Jun. 1, 2004). 

[12] GAO, Iraq Contract Costs: DOD Consideration of Defense Contract 
Audit Agency's Findings, GAO-06-1132 (Washington, D.C.: Sep. 25, 2006). 

[13] GAO-04-605. 

[14] GAO-07-145. 

[15] GAO-03-695. 

[16] GAO-04-854. 

[17] GAO-07-145. 

[18] See Department of Defense, Measuring Stability and Security in 
Iraq (Washington, D.C.: August 2006). 

[19] Iraq's fiscal year begins on January 1 of each year.

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