The Department of State is now responsible for overseeing U.S.  efforts to rebuild Iraq. U.S. Efforts Have Produced Mixed Results in Restoring Iraq’s Essential Services

The United States has made some progress in restoring Iraq’s essential  services, but as of August 2006, such efforts generally have not met prewar  production levels or U.S. goals. The continuing violence may make it difficult  for the United States to achieve its goals. Iraq Contracting Challenges Reflect Systemic Issues Faced by DOD

The contracting challenges encountered in Iraq are emblematic of  systemic issues faced by DOD. At the sector, program, and project levels, the failure to define  realistic requirements has had a cascading effect on contracts and made it  difficult to take subsequent steps necessary to get to successful outcomes. For example, in the absence of settled requirements, DOD has sometimes  relied on what are known as undefinitized contractual actions, which were  used extensively in Iraq and can leave the government exposed to  increased costs. Managing risks when requirements are in flux requires  effective oversight, but DOD lacked the capacity to provide a sufficient  acquisition workforce, thereby hindering oversight efforts. In September 2005, we reported that difficulties in defining the cost,  schedule, and work to be performed associated with projects in the  water sector contributed to project delays and reduced scopes of  work. 1). During the initial stages of reconstruction, we and the DOD Inspector  General found instances in which DOD improperly used interagency  contracts for many of the same reasons. Overall, the Special Inspector General has reported that competition has  improved for Iraq reconstruction projects since the early reconstruction  efforts. Just as multiple factors contribute to success or failure, multiple actors  play a role in achieving successful acquisition outcomes, including policy  makers, program managers, contracting officers, and the contractors  themselves. Looking to the future, about one-third of DOD’s planned construction  work remains to be completed, including some work that is not planned  for completion until the end of 2008. Scope and Methodology

In preparing this testimony, we relied primarily on our completed and  ongoing reviews of efforts to rebuild Iraq that we have undertaken since  2003, as well as our work related to selected DOD contract management  issues.
Why GAO Did This Study

The United States, along with its coalition partners and various international organizations, has undertaken a challenging, complex, and costly effort to stabilize and rebuild Iraq. The Department of Defense (DOD) has responsibility for a significant portion of the reconstruction effort. Amid signs of progress, the coalition faces numerous political, security, and economic challenges in rebuilding Iraq. Within this environment, many reconstruction projects have fallen short of expectations, resulting in increased costs, schedule delays, reduced scopes of work, and in some cases project cancellations. This testimony (1) discusses the overall progress that has been made in rebuilding Iraq and (2) describes challenges faced by DOD in achieving successful outcomes on individual projects. This testimony reflects our reviews of reconstruction and DOD contract management issues, as well as work of the Special Inspector General for Iraq Reconstruction. In our previous reports, we have made several recommendations to improve outcomes in Iraq. DOD generally agreed with our recommendations.

What GAO Found

Overall, the United States generally has not met its goals for reconstruction activities in Iraq with respect to the oil, electricity, and water sectors. As of August 2006, oil production is below the prewar level, and the restoration of electricity and new or restored water treatment capacity remain below stated goals. One-third of DOD's planned construction work still needs to be completed and some work is not planned for completion until late 2008. Continuing violence in the region is one of the reasons that DOD is having difficulty achieving its goals. The contracting challenges encountered in Iraq are emblematic of systemic issues faced by DOD. When setting requirements for work to be done, DOD made assumptions about funding and time frames that later proved to be unfounded. The failure to define realistic requirements has had a cascading effect on contracts and has made it difficult to take subsequent steps to get successful outcomes. For example, in the absence of settled requirements, agencies sometimes rely on what are known as undefinitized contract actions, which can leave the government exposed to increased costs. Further, DOD lacked the capacity to provide effective oversight and manage risks. We also found that DOD, at times, improperly used interagency contracts and was not able to take advantage of full and open competition during the initial stages of reconstruction. Just as multiple factors contribute to success or failure, multiple actors play a role in achieving successful acquisition outcomes, including policy makers, program managers, contracting officers, and the contractors themselves.