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20 of 150 Health Clinics Finished
LA Times
By T. Christian Miller
April 29, 2006

WASHINGTON — Parsons Corp., the Pasadena engineering firm that won one of the largest rebuilding contracts in postwar Iraq, fell dramatically short of a number of goals, according to interviews and documents that cite shoddy work and negligent government oversight.

The firm was to have rebuilt Iraq's health and security infrastructure. However, an audit and interviews show it will finish only 20 of 150 planned health clinics, and nearly $70 million of medical equipment meant for the clinics sits unused.

Additionally, as few as 12 of 20 hospitals planned to be refurbished will be completed. Some border forts built by the company lack walls, and some fire stations may be structurally unsound.

The U.S. Army Corps of Engineers failed to properly monitor Parsons' performance, stonewalled investigative efforts and exercised "poor cost controls" as Parsons spent $186 million on a contract to build the health clinics, according to a draft copy of an audit obtained by The Times. About $60 million of that was spent by Parsons on management and administration.

The reports and interviews taken together suggest a wholesale failure in two of the most crucial areas of the Iraq reconstruction — health and safety — which were supposed to win Iraqi goodwill and reduce the threat to American soldiers.

Parsons officials declined to comment because they had not seen a copy of the audit, which was conducted by the U.S. special inspector general for the reconstruction of Iraq.

"There's a lot of blame to go around," said Ginger Cruz, deputy inspector general for the oversight agency.

In the past, Parsons has said security problems in Iraq made work difficult. The company did finish at least two government administration buildings as well as courthouses and oil infrastructure projects.

In a letter responding to the audit, the Army corps deflected blame for oversight failures and sharply criticized Parsons.

"From the beginning of the [health clinic] project, Parsons failed to meet various contract requirements through numerous significant management and technical shortcomings," according to a letter signed by Army corps Brig. Gen. William H. McCoy.

"They ignored, or failed to respond adequately to, numerous expressions of concern by the government over these issues, and in some cases failed or refused to provide the government with information that would have allowed the government to make decisions to assist Parsons in regaining control over subcontractor performance and cost," McCoy wrote.

McCoy did not respond to requests from The Times for comment Friday.

In 2004, Parsons and its partners were competitively awarded contracts potentially worth more than $2 billion to rebuild Iraq's health, justice and oil infrastructures. Overnight, the employee-owned engineering firm became the second-biggest player in Iraq's restoration, behind Houston-based Halliburton Co.

Parsons' work to date under its umbrella contracts has not come close to that cap.

The draft audit, which is to be formally released in the next few days, covered only the health clinic projects. The remaining portion of that contract has been canceled. The company will continue its work on refurbishing hospitals and justice system facilities such as prisons and courthouses.

For Parsons, the Iraq reconstruction was a chance to expand into the business of overseas federal contracts, a field in which the company was not well-established. It set up an office in Baghdad in March 2004.

Almost from the start, the company — and the rebuilding effort as a whole — ran into trouble. A spasm of violence in the spring of 2004, as Americans battled guerrilla fighters in Najaf and Fallouja, forced American contractors to withdraw personnel or sharply curtail their operations.

Parsons' engineers were unable to visit building sites, according to interviews and documents, and began relying heavily on Iraqi nationals and subcontractors. The company had trouble obtaining skilled laborers and high-quality building materials.

Security problems drove up costs and delayed projects. Parsons misled contracting officers about progress, according to the Army Corps of Engineers, which oversees contractors working on the reconstruction.

At the same time, Parsons officials were facing changing, sometimes contradictory orders from government contract officers, the audit said.

On one occasion, Parsons was told to build a clinic on the site of a mosque. The company refused. On another, the company was assigned to build a clinic on a pond and had to fill in the body of water before proceeding, the audit said. The government unilaterally decided to speed up construction, compressing a two-year schedule into one.

In one stretch, Parsons officials had seven different contract officers in a year, creating "organizational turbulence," according to interviews and the draft of the audit.

"Contractor performance and U.S. government management actions were both factors in the failure to complete the [health clinics] project as planned," the draft said.

By July 2005, the government issued a "letter of concern" to Parsons about construction delays that drove up costs. That fall, government officials began canceling health clinics to save money. The concerns grew so serious that U.S. Ambassador Zalmay Khalilzad became involved.

When inspectors from the Army corps and the inspector general took a close look at the company's work, the audit said, their worries deepened. Only a handful of clinics had been completed. Others were only partially built, and some had problems. The inspector general found evidence of concrete honeycombed with holes and sagging joints.

The company had slipped so far behind that the Army corps decided to cut its losses. In March, the Army corps and Parsons reached a settlement where Parsons agreed to finish 20 health clinics and terminate further work on the contract.

The remaining 120 or so clinics — many of them close to completion — are to be finished once other funding sources are found. The audit estimated that $36 million is needed to complete the work, though others said the real costs might be two or three times higher.

"Poor contractor performance delayed completion of the project and escalated costs," the draft said.

U.S. officials said they were determined to find the money needed to complete the clinics, though it was unclear where the funding would come from.

One source, who requested anonymity because the person was not authorized to speak on the topic, said that as many as eight hospital projects might be left unfinished because of rising costs.

Meanwhile, the $18.4 billion Congress set aside for Iraq reconstruction is rapidly running out.

The U.S. is leery about simply turning the incomplete clinics over to the Iraqi government, which has had trouble running electricity and oil projects bequeathed to them by the reconstruction program.

"We are not certain of the path to complete the remaining clinics, we should be careful about obligating ourselves to a commitment that may not be feasible," wrote David Satterfield, deputy director of the Iraq Reconstruction Management Office.

In addition to the health clinic problems, government audits and inspections show that Parsons has had trouble with many of its other tasks.

On seven of 17 security forts built along the Iranian border to help stem the flow of suspected terrorists, the company failed to build a wall around the fort. Beams in the forts were "undersized and under strength," according to a January report by the inspector general.

A $1.3-million fire station built by Parsons in a town outside Irbil in northern Iraq also has problems, according to a report released Friday. Engineers are not sure whether Ainkawa's new fire station is structurally sound because of questions about construction quality.

Another problem is medical equipment. Before the clinic contract was canceled, Parsons purchased $70 million of X-ray machines, ultrasounds and incubators for the planned clinics. That equipment will be stored in a warehouse.

The inspector general sent a letter this month warning that the government needed to immediately develop a better plan to monitor the medical equipment, which is considered vulnerable to theft and deterioration.

Original Text