Senators Call for Immediate
Disclosure on Non-Competitive Bids for Iraqi Reconstruction
From Senate floor, Wyden calls on
Administration to “fulfill responsibility” to taxpayers
July 10, 2003
Washington, DC – U.S. Senator Ron Wyden
called today for immediate disclosure by the U.S. Agency for
International Development of all documents related to Iraqi
reconstruction contracts awarded without full and open competitive
bidding. Senator Wyden, joined by Senator Hillary Rodham Clinton
(D-N.Y.), was prompted by recent reports of new contracts let
without competition and possible conflicts of interest in the
awards process. Today Wyden also asked Defense Secretary Donald
Rumsfeld for information about a number of contracts let by
the Defense Department. Below please find the prepared text
of Senator Wyden’s remarks to the U.S. Senate today:
Prepared Remarks to the United States Senate
Calling for Full Department of Defense and USAID Disclosure
on Non-Competitive Bids for Iraqi Reconstruction Contracts
M. President, I rise today to renew my call for accountability
to the taxpayers of this country – as American tax dollars
pay to rebuild Iraq.
For some time now, a bipartisan group of Senators has expressed
concern about the letting of Iraqi reconstruction contracts
without competitive bidding. Our concern led to an amendment
on the Defense authorization bill. It requires the U.S. Agency
for International Development, and the Department of Defense,
to publicly disclose their reasons for awarding closed-bid
or no-bid contracts.
But as the Defense bill winds its way through the legislative
process, every day more contracts are being let. These awards
are going out with no bids, no competition, and no explanation
to the American people of how their hard-earned dollars are
being spent.
So, M. President, today my colleague from New York and I are
calling for faster action. Senator Clinton and I are requesting
the immediate public disclosure of all documents related to
USAID’s decision to exempt Iraqi contracts from full
and open bidding. In addition, I am asking Defense Secretary
Rumsfeld for explanations regarding particularly troubling
contracts awarded by his Department.
A number of my colleagues have just returned from Iraq. To
many of them one thing was clear: the time the United States
military is going to have to spend in that country will be
longer, rather than shorter. The work to rebuild that ravaged
nation is going to be more difficult, rather than less so.
America’s obligation to the Iraqi people seems greater
than expected, not smaller.
It is also becoming increasingly clear that U.S. taxpayers
will shoulder much of the cost of America’s involvement
in Iraq. This week civil administrator Paul Bremer said that
just over the next six months, Iraqi oil revenues will be $2
billion short of what will be needed to finance occupation
and reconstruction. U.S. taxpayers will fund the difference – for
these six months, and for the foreseeable future. Yet the rationale
behind much of the cost is unknown. Companies have been given
contracts for work in Iraq with little or no competition, and
no explanation. The process is not only suspect, it’s
historically financially unsound.
The General Accounting Office has reported that sole-source
or limited-source contracts usually aren’t the best buy.
The GAO found that military leaders have often simply accepted
the level of services given by a contractor without ever asking
if it could be done more efficiently or at lower cost. Yet
these non-competitive contracts seem to be the rule, not the
exception, in Iraqi reconstruction.
In my view, when Federal agencies employ a process that may
expose taxpayers to additional cost, the need for explanation
increases one-hundredfold. The call that began months ago,
for transparency in the use of these dollars, is more urgent
now than ever.
I was pleased to join Senator Collins, the distinguished chair
of the Governmental Affairs Committee, in first issuing that
call three months ago. Working with Senator Clinton, she and
I sought in April to amend the supplemental Defense bill to
require transparency in the contracting process.
Eventually, our bipartisan coalition included Senator Byrd,
Senator Cantwell, Senator Lautenberg and Senator Lieberman.
That group introduced the Sunshine in Iraq Reconstruction Contracting
Act. As I noted, that provision was eventually added to the
Defense authorization bill with the help of Senators Warner
and Levin. It simply requires justifying documents for any
non-competitive bidding process for Iraqi contracts to be made
public. Agencies are already required by law to prepare this
rationale for sole source and limited-source bidding. Our amendment
simply forced that information to light.
In speaking out to support that legislation, my colleagues
and I detailed the daily reports of closed-bid and no-bid contracts
being awarded for Iraqi reconstruction. They ranged from a
$2 million deal to rebuild Iraqi schools, to a $600 million
mother lode of a contract to reinvent Iraq’s infrastructure.
On April 19 of this year, a $50 million policing contract
was awarded through closed bidding. On the same day, it was
reported that an $8 million contract for personnel services
had been awarded nearly a month before the war began. A single
company had been invited to bid for the job.
By the time the end of hostilities was officially declared
in May, billions of dollars in Iraqi reconstruction contracts
had already been awarded. Again, there was little or no competition.
There was little or no accountability to the taxpayer.
One only has to pick up a newspaper to see that this process
continues. Thank heaven for the free press. Right now the media
is the American people’s only source for insight on these
contracts, so often awarded in secret. And the deeper reporters
dig, the more troubling the facts get.
Two weeks ago the New York Times Magazine ran a feature-length
article describing the letting of a multi-million dollar oilfield
contract to Kellogg, Brown and Root. That contract was sole-source,
meaning that Kellogg Brown won it without having to compete.
But now it appears that Kellogg, Brown and Root actually developed
the Army’s plan for the oilfield restoration effort – and
then was awarded the contract to carry out the plan almost
automatically. M. President, I ask unanimous consent that this
compelling article be entered into the Record.
Let me be clear: this process essentially allowed an incumbent
contractor to identify the criteria for a multi-billion dollar
contract and virtually ensured that it would be awarded the
contract without competition. And the inside track doesn’t
peter out there. Under the auspices of an even larger, incredibly
lucrative contract with the Army, Kellogg Brown seems to have
written the Army’s so-called “contingency plan” for
rebuilding Iraq. If the news reports are true, then the potential
for sole-source, custom-crafted contracts is practically guaranteed
by Kellogg Brown’s agreement.
For this reason, Senator Clinton and I have asked the Defense
Department to provide, within 30 days, answers to some of the
serious questions these particular contracting processes raise.
The Department of Defense recently announced that it will
go back and solicit bids for the oilfield contracts. That
essentially ends the original, controversial contract with
Kellogg Brown and Root. But I want to know whether in re-letting
this contract, the Department of Defense is acknowledging
a problem with the original agreement. I want to know whether
they often let other contracts to other companies this way.
I want to know whether they intend to continue this practice
where it has not yet been discovered, and here’s why:
if individual contractors are customarily setting the criteria
for the work they plan to pursue, there are serious conflict
of interest issues that the Department should root out right
now.
When you consider that the Kellogg Brown and Root contracts
are so-called cost-plus contracts, this arrangement becomes
even less acceptable. Cost-plus lets companies spend what it
thinks is necessary and then tack on a percentage fee to make
a profit. The more taxpayer dollars the company spends, the
more profit they bring home. A number of Iraqi reconstruction
contracts – not just Kellogg Brown’s – are
designed this way.
If the Federal government is going to spend my constituents’ money
in this manner, without asking for competitive bids, my constituents
deserve to know why. It may take upwards of $100 billion to
rebuild Iraq. There’s no place for waste.
Senator Clinton and I have made it clear that this is serious
business. Here’s our bottom line: there are too many
questions and the stakes are too high not to demand public
disclosure of this information. The American people are footing
the bill for repairs in Iraq that they often can’t get
in their own cities and towns on U.S. soil. The least Federal
agencies can do is be clearer about who’s getting the
money and why. And certainly, they should seek to avoid even
the appearance of impropriety.
Unfortunate appearances extend far beyond the Army’s
dealings with Kellogg Brown and Root. The USAID’s own
Inspector General has reported that the agency violated Federal
conflict of interest requirements in the letting of one contract.
A report released on June 6 says that an employee of Creative
Associates International participated in a November 2002 roundtable
discussion with USAID officials. Creative Associates is the
company that won the $2 million bid to rebuild Iraq’s
schools. Their roundtable covered a number of issues that USAID
later included in its request for proposals on Iraqi schools.
The IG concluded that by holding this meeting less than four
months before the request was issued, USAID officials did
not adhere to Federal requirements to avoid conflict of interest.
The IG also said it couldn’t rule out that the bidder
had gained a competitive advantage from participating in
the meeting.
Questions have also been raised as to how MCI – a company
that does no wireless service in the U.S. and never has – could
end up winning the contract from the Defense Department to
set up a wireless telecom network in Iraq.
I understand that in some cases, there may be valid reasons
for the awarding of contracts that seem suspect to the untrained
eye. One explanation I’ve heard repeatedly is the need
to award some contracts quickly. But I cannot imagine that
the need to move quickly is a valid justification for ignoring
experience as a criterion.
Those are just the latest concerns that have come to light.
I have come to this chamber before with tales of more suspect
criteria for awarding contracts. Most notably, USAID originally
announced that only companies with security clearances could
apply for certain contracts. But then USAID’s own Inspector
General revealed that the agency waived security requirements
on one bid.
It turned out that the winner of a $4 million ports contract
did not have the security clearance that was supposedly essential
when invitations to bid went out. In effect, USAID eliminated
the very criterion it used to limit bidders on a project. The
agency just suddenly said that the outbreak of war in Iraq
had made the security clearance unnecessary.
As a member of the Intelligence Committee, I had thought the
argument was pretty shaky before. I wasn’t certain why
you needed a security clearance to fix a sewer system. But
news of the disappearing criteria turned the agency’s
argument about security clearances from suspect to nearly ludicrous.
I said then, and I’ll say it now: I believe USAID and
the Department of Defense would have better explanations – or
a more open process – if they knew they had to face the
public on these issues.
M. President, I am here today with my colleague from New York
because I believe that the time to face the public is now.
I am grateful for the bipartisan legislative support that our
efforts have received. I look forward to seeing disclosure
rules become the law of the land for the letting of Iraqi contracts.
But there is no time to waste waiting for accountability. Too
much money has already moved out of the public coffers and
into private hands, with too little assurance that those hands
have won their work contracts fairly.
The only way to answer the American people’s concerns
about the process USAID used to award Iraq reconstruction contracts
is for the agency to make all the relevant documents public.
In order to assure the taxpayers that their money is spent
as cost effectively as possible, the Department of Defense
needs to answer the many questions that have been raised about
its bidding process – or lack thereof.
This Administration has chosen repeatedly against the use
of free market competition to get the most reasonable prices
from the most qualified contractors for Iraqi reconstruction.
If there are good reasons for sole-source and invitation-only
contracts for these projects, the public has a right to hear
them. If they are in fact acceptable arguments, then there’s
no reason they should stay secret. If these awards are the
result of an inside-track process that’s wasting taxpayer
cash, that information should come to light right now. Justice
Brandeis said, sunlight is the best disinfectant. I couldn’t
agree more.
The Senate has acted legislatively. However, I call on the
Administration to act honorably today – to look the American
people in the eye and give a full accounting of their work.
Legislation may take time to turn into law. These government
agencies can meet their responsibility to the American people
now. I call on them to do so.
