Order Code RL31833
Iraq: Reconstruction Assistance
Updated April 6, 2007
Curt Tarnoff
Specialist in Foreign Affairs
Foreign Affairs, Defense, and Trade Division

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Iraq: Reconstruction Assistance
Summary
A large-scale assistance program has been undertaken by the United States in
Iraq. To date, more than $35 billion has been appropriated for Iraq reconstruction.
FY2007 funding for Iraq is provided under the terms of a continuing appropriations
resolution (H.R. 5631/P.L. 109-289 Division B, as amended by H.J.Res. 20 on
February 15, 2007). Country allocations based on that resolution have not yet been
determined. On February 5, the Administration presented an FY2007 Supplemental
request for Iraq reconstruction of about $6.6 billion, a regular FY2008 request of
$391.8 million, and an Emergency FY2008 request of $3.5 billion.
Contributions pledged by other donors at the October 2003 Madrid donor
conference and in subsequent meetings have amounted to roughly $15.2 billion in
grants and loans, of which about $3.8 billion had been disbursed as of August 2006.
On June 28, 2004, the entity implementing assistance programs, the Coalition
Provisional Authority (CPA), dissolved, and sovereignty was returned to Iraq. U.N.
Security Council Resolution 1546 of June 8, 2004, returned control of assets held in
the Development Fund for Iraq to the government of Iraq. U.S. economic assistance
is now provided through the U.S. embassy while security aid is chiefly managed by
the Pentagon.
Many reconstruction efforts on the ground are completed or ongoing, but
security concerns have slowed progress. About 33% of reconstruction funding has
been targeted at infrastructure projects — roads, sanitation, electric power, oil
production, etc. About 44% is being used to train and equip Iraqi security forces. A
range of programs — accounting for roughly 23% of total appropriations — are in
place to offer expert advice to the Iraqi government, establish business centers,
provide school books and vaccinations, etc.
The report will be updated as events warrant. For discussion of the Iraq political
situation, see CRS Report RL31339, Iraq: Post-Saddam Governance and Security,
by Kenneth Katzman.

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Contents
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Funding for Reconstruction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
U.S. Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The President’s New Strategy and FY2007 and FY2008
Appropriations Requests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Oil Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Iraqi Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Other Donors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Iraq Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
United Nations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
U.S. Assistance Policy and Program Structure . . . . . . . . . . . . . . . . . . . . . . . . . . 13
U.S. Reconstruction Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Reconstruction Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Reconstruction Programs and Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Infrastructure Sustainability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Ministerial Capacity Development (MCD) . . . . . . . . . . . . . . . . . . . . . 20
Provincial Reconstruction Teams (PRTs) . . . . . . . . . . . . . . . . . . . . . . 20
The Role of Iraqis in Reconstruction and the Plan to Re-start
State-Owned Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
CERP and CHRRP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Accountability, Waste, and Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
The Development Fund for Iraq (DFI) . . . . . . . . . . . . . . . . . . . . . . . . . 31
Assessments of Reconstruction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
The Iraq Study Group Recommendations and Other Proposals . . . . . 35
Appendix: Criticisms of Iraq Reconstruction . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
List of Tables
Table 1. U.S. Assistance to Iraq . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Table 2. Administration Request for Iraq Reconstruction . . . . . . . . . . . . . . . . . . . 5
Table 3. Iraq Relief and Reconstruction Fund (IRRF) . . . . . . . . . . . . . . . . . . . . 17

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Iraq: Reconstruction Assistance
Most Recent Developments
On March 29, the Senate approved its version of H.R. 1591, the FY2007
Supplemental appropriations. It would provide $6.5 billion for Iraq reconstruction
activities, $143 million less than the Administration request.
On March 23, the House approved H.R. 1591, the FY2007 Supplemental
appropriations, providing $6.3 billion for Iraq reconstruction activities, roughly $300
million less than the Administration request.
On February 5, the Administration presented three budget requests to fund Iraq
reconstruction: an FY2007 Supplemental request of about $6.6 billion (after a March
9 revision), a regular FY2008 request of $391.8 million, and an Emergency FY2008
request of $3.5 billion.
Introduction
Following years of authoritarian rule and economic sanctions, the United States
and the international community agreed in the spring of 2003 that efforts should be
made to rehabilitate economic infrastructure and introduce representative government
to post-war Iraq, among other objectives.1 To meet these ends, a large-scale
assistance program has been undertaken by the United States in Iraq. This program,
funded through a mix of appropriations accounts, is undergoing increased scrutiny
in the 110th Congress. This report describes recent developments in this assistance
effort and key issues of potential interest to Congress.2
Funding for Reconstruction
The first formal estimate of the possible cost of Iraq reconstruction amounted
to $55 billion over the four years from 2003 through 2007. This figure was the sum
total of an October 2003 World Bank and U.N. Development Group needs
assessment of 14 sectors of the Iraqi government and economy — $36 billion —
combined with a $19.4 billion Coalition Provisional Authority (CPA) projection for
1 U.N. Security Council Resolution 1483, May 22, 2003.
2 For detailed discussion of the Iraq political situation, see CRS Report RL31339, Iraq:
Post-Saddam Governance and Security, by Kenneth Katzman.

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security, oil, and other sectors not covered by the Bank/U.N. assessment.3 These
amounts, calculated in mid-2003, did not take into account the significant costs of
instability and security needs that have emerged since then.
In the succeeding years, several “spigots” have been available to fund Iraq
reconstruction. U.S. foreign aid appropriations for Iraq have been provided mostly
in annual emergency supplemental bills beginning in FY2003. International donors
have also made aid contributions. Iraqi funds, largely derived from oil export profits,
have been employed to cover the “normal” operating costs of the Iraqi government,
and, when sufficient amounts are available, have been used to address reconstruction
needs. Additionally, the reduction or rescheduling of Iraqi debt repayments has made
further resources available. These sources of reconstruction funding are discussed
below.
U.S. Assistance
In the first several years of the U.S. effort in Iraq, the bulk of U.S. assistance
was provided through a special Iraq Relief and Reconstruction Fund (IRRF)
supporting aid efforts in a wide range of sectors, including water and sanitation, food,
electricity, training and equipping of Iraqi security forces, education, and rule of law.
The Fund was established in the FY2003 Emergency Supplemental (P.L. 108-11,
H.R. 1559/H.Rept. 108-76), signed on April 16, 2003, with an appropriation of $2.5
billion. A subsequent FY2004 Emergency Supplemental (P.L. 108-106, H.R.
3289/H.Rept. 108-337), signed on November 6, 2003, added $18.4 billion to the
IRRF. The Fund was placed under the direct control of the President.
In addition to the IRRF, funds drawn from other accounts have been used for
similar purposes. Department of Defense appropriations have gone to pay part of the
costs for repair of Iraq’s oil infrastructure, for training of the Iraqi army, and toward
the Commanders Emergency Response Program (CERP). In addition to drawing
from the IRRF, the U.S. Agency for International Development (USAID) has used
its own funds to pay for humanitarian and other programs in Iraq.
The FY2005 emergency supplemental (P.L. 109-13, H.R. 1268/H.Rept.109-72),
signed on May 11, 2005, provided $5.4 billion for a new DOD account, the Iraq
Security Forces Fund (ISFF), supporting the training and equipping of Iraqi security
forces. Previously, most security training funds had been provided out of the IRRF.
Policy responsibility for the IRRF, originally delegated to the CPA (under DOD
authority), had, since the end of the occupation in June 2004, belonged to the State
Department as a result of a Presidential directive (NSPD 36, May 11, 2004), which,
nonetheless, continued to give DOD the main role in directing security aid. Putting
funding for security assistance entirely under DOD, however, is a sharp departure
from historic practice. Under most military assistance programs — Foreign Military
Financing (FMF) and the International Military Education and Training Program
(IMET) — State makes broad policy and DOD implements the programs. The
conference report on the supplemental adopted the President’s formula for the new
3 For the full text of the report online, see the World Bank website at [http://siteresources.
worldbank.org/INTIRAQ/Overview/20147568/Joint%20Needs%20Assessment.pdf].

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CRS-3
account but required that the Iraq Security Forces Fund be made available “with the
concurrence of the Secretary of State.” The FY2006 Emergency Supplemental (P.L.
109-234) added $3 billion to the ISFF, and the FY2007 regular Defense
appropriations (P.L. 109-289) added another $1.7 billion.
Table 1. U.S. Assistance to Iraq
(appropriations in $ millions)
Fiscal Year
2003
2004
2005
2006
2007
Total
Iraq Relief and
2,232.3* 17,849.5*
—
10.0
—
20,091.8
Reconstruction
Fund (IRRF)
DOD - Iraq
5,700.0
Security Forces
—
—
3,007.0 1,700.0
10,407.0
Fund (ISFF)
DOD - CERP
—
140.0
718.0
753.0
375.0
1,986.0
DOD - Oil Repair
802.0
—
—
—
—
802.0
DOD - Iraq Army
51.2
—
—
—
—
51.2
Other USAID
469.9
—
—
—
—
469.9
Funds
Economic
Support Fund
—
—
—
1,534.6
**
1,534.6
(ESF)
INCLE (Int’l
Narcotics & Law
91.4
**
91.4
Enforcement)
IFTA (Treasury
13.0
**
13.0
Dept. Tech Asst.)
IMET (Int’l Military
—
—
—
0.7
**
0.7
Ed & Training)
Total U.S.
Reconstruction
3,555.4
17,989.5
6,418.0
5,409.7
2,075.0
35,447.6
Assistance
*The IRRF was originally appropriated $2,473 million for FY2003 and $18,439 million for FY2004.
Amounts shown above are those available for use after $241 million in FY2003 and $590 million in
FY2004 appropriations expired.
**Country allocations based on the FY2007 Continuing Resolution have not yet been made.
Sources: Section 2207 Report to Congress, January 2007; SIGIR Report to Congress, January 2007;
Department of State, Iraq Weekly Status Report, April 4, 2007; and CRS calculations.
For the regular FY2006 foreign operations appropriations, the Administration
departed from previous practice by requesting $414 million in Iraq reconstruction
funds under traditional foreign aid accounts instead of funneling requests exclusively
through emergency supplementals and for the IRRF. However, some Members felt
that sufficient funds remained unobligated in the IRRF — at the time, $3-$5 billion
— from which the Administration could draw to pay for continuing reconstruction.
As a result, Congress provided (P.L. 109-102, H.R. 3057) only $61 million in funds

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CRS-4
for Iraq ($60.4 million after rescission) — $5 million for the Marla Ruzicka Iraqi
War Victims Fund and $28 million each for the democratization activities of the
International Republican Institute and the National Democratic Institute.
In the FY2006 Emergency Supplemental Appropriations (P.L. 109-234), signed
into law on June 15, 2006, Congress approved (H.R. 4939; H.Rept. 109-494)
roughly $5 billion for Iraq reconstruction activities — $3 billion for the ISFF; $378
million for the CERP; and $1.6 billion in so-called “stabilization” assistance for Iraq
to be provided largely under the ESF account ($1.485 billion).4
FY2007 regular funding for Iraq is provided under the terms of a continuing
appropriations resolution (H.R. 5631/P.L. 109-289 Division B, as amended by
H.J.Res. 20, P.L. 110-5 on February 15, 2007). It sets funding levels for major aid
accounts. Country allocations based on those levels have not yet been determined
and are not likely to be published until late April. However, in making its original
FY2007 request in February 2006, the Administration requested nearly $773 million
in funding for Iraq under several accounts, including $478.8 million in ESF to
continue programs to sustain U.S.-funded infrastructure, and support democracy,
governance, civil society, economic policy reform, private sector, and agriculture
programs; and $254.6 million in the International Narcotics and Law Enforcement
(INCLE) account aimed at rule of law programs.
The President’s New Strategy and FY2007 and FY2008
Appropriations Requests. On January 10, 2007, President Bush proposed a new
Iraq strategy to deal with increasing instability, especially in Baghdad. In addition
to the introduction of about 21,500 more U.S. troops (later increased to 26,200) and
other efforts to create a more secure environment for successful political and
economic development, the President’s scheme included $1.2 billion in new
reconstruction initiatives which were expected to be part of an FY2007 supplemental
appropriations request:
! $414 million to support a doubling in the number of Provincial
Reconstruction Teams (PRTs) from 10 to 20 and an increase in the
number of U.S. civilian staff for them from 250 to at least 400. The
Administration promised better integration of civilian and military
elements in the field;
! $350 million for the Commander’s Emergency Response Program
(CERP) which allows military officers to distribute development
grants at the grassroots community level; and
! $400 million for a new quick-response civilian version of the CERP.
This had been a recommendation of the Iraq Study Group (No. 68).
Complementing the U.S. effort, the Iraqi government committed $10 billion of its
funds to reconstruction, including a jobs creation program. A long-discussed
4 The conference report also provided funding for operational and security costs — $220.8
million for the PRTs, $101 million for USAID, and $24 million for the SIGIR.

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CRS-5
International Compact for Iraq was also expected to stimulate reconstruction
donations from other countries.
Table 2. Administration Request for Iraq Reconstruction
FY2008
FY2007 Supplemental
FY2008 Regular
Emergency
150 Account
ESF
$2,072 million:
$298 million:
$772 million:
of which —
for community
of which —
$1.254 billion for PRTs, CAPs,
infrastructure; job
$390 million for
and CSP (community
training; voc ed;
PRTs;
stabilization program);
micro-loans; PRT
$134 million for
$100 million for economic, ag
local governance.
strengthening
reform, priv sec reform;
Iraqi gov ops and
$718 million for Ministerial
sustainability;
Capacity Development (MCD),
$248 million for
democracy, civil society.
MCD.
INCLE
$200 million:
$75.8 million:
$159 million
for strengthening judicial
for development
process and prison
of criminal justice
construction.
system.
NADR
$7 million:
$16 million
—
for demining
MRA
$15 million
—
$35 million
IMET
—
$2 million
—
Treasury
$2.75 million
—
—
IDFA
$45 million
—
—
TOTAL
$2,341.75 million
$391.8 million
$966.0 million
150
Account
050 Account
ISFF
$3,842.3 million
—
$2,000.0 million
CERP
$350 million
—
$977.4 million:
for Iraq &
Afghanistan.
Iraq
$100 million:
—
—
Freedom
for Iraqi State-owned
Fund
enterprises
GRAND
$6,634.05 million
$391.8 million
$3,454.7
TOTAL
(counting ½
150&050
CERP)
Source: Departments of State and Defense FY2008 Congressional Budget Justifications.
Note: ESF=Economic Support Fund, INCLE=International Narcotics Control and Law Enforcement,
MRA=Migration and Refugee Assistance, IMET=International Military Education & Training,
IDFA=International Disaster and Famine Assistance, ISFF=Iraq Security Forces Fund,
CERP=Commander’s Emergency Response Program.

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CRS-6
On February 5, 2007, the Administration presented its formal government-wide
budget request. Funding for Iraq reconstruction is requested in three tranches:
FY2007 supplemental, FY2008 regular, and FY2008 emergency appropriations. In
all cases, the funds appear to be supportive of the President’s new strategy for Iraq,
although at higher levels than in the original announcement. The budget requests
would provide $2.3 billion, $391.8 million, and $966 million, respectively, under the
foreign operations appropriations, mostly in ESF for the kinds of community, small-
scale activities that are undertaken by the PRTs, such as improvements to community
infrastructure, job training, vocational education, and micro-loans. In addition to
PRT assistance, these requests would provide support at the national level for
Ministerial capacity development, agriculture and private sector reform,
strengthening of the judicial process, prison construction, and democratization
efforts.
The FY2007 supplemental and the FY2008 emergency requests include
additional funding under DOD appropriations, both for the CERP and the ISFF. The
ISFF would receive $3.8 billion in FY2007 supplemental and $2 billion in FY2008
emergency appropriations. The CERP would receive $350 million in the FY2007
supplemental and probably at least half of a $977.4 million FY2008 emergency
request that includes Afghanistan. In addition, the FY2007 supplemental includes
a request of $100 million in the Iraq Freedom Fund account of the DOD budget to
support a plan to rehabilitate more than 140 of the nearly 200 state-owned enterprises
that composed a large portion of the Iraqi economy prior to the U.S. occupation.
Finally, funds were also requested for operational costs (not included in the table
above) for staffing and administering reconstruction programs. In the FY2007
Supplemental: $414 million for PRT operations and $35 million for the SIGIR under
the State budget and $150 million in the DOD Iraq Freedom Fund to support PRT
operations. In the FY2008 Emergency request: $679 million for PRT and $45.8
million for USAID operations.
Congressional Action on the FY2007 Supplemental. On March 23, the
House approved H.R. 1591, the FY2007 Supplemental appropriations (H.Rept. 110-
60). The bill would provide $6,329.05 million for Iraq reconstruction, a cut of $305
million from the Administration request. The cuts occur in three accounts. The ESF
account is decreased by $185 million — $100 million from the PRTs, $30 million
from the Community Stabilization Program (CSP), and $80 million from proposed
political development activities (National Capacity Development, legal reform,
democracy).5 The bill adds $25 million to USAID’s Community Action Program
(CAP). A $20 million cut in INCLE funds was aimed at the requested construction
of prison facilities. The revised Iraq Freedom Fund $100 million request to assist
Iraqi state-owned enterprises is neither funded nor addressed.
The legislation would impose conditions on the availability of appropriated
reconstruction funds under the ISFF, ESF, and INCLE accounts. Half of the
5 It should be noted, however, that bill language would permit the Secretary of Defense to
move as much as $100 million from the Operation and Maintenance, Defense-Wide account
to ESF in support of the PRTs.

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appropriated funds would be withheld unless the President certified by October 1,
2007, that, among other things, the government of Iraq had enacted the hydro-carbon
law, taken specific steps toward provincial and local elections, reformed de-
Baathification laws, and begun expenditure of the promised $10 billion Iraqi funds
for reconstruction. ESF funds supporting the CAP and CSP programs as well as
democratization activities, however, would be excepted from the certification
requirement.
H.R. 1591 would require the appointment by the President of a Coordinator for
Iraq Assistance. The Coordinator would develop and implement an assistance
strategy, coordinate assistance implemented by multiple U.S. departments and
agencies, work with Iraq to achieve benchmarks, coordinate with other donors, and
ensure adequate management and accountability. Currently, three individuals play
roles that could be described as coordinating: the Coordinator for Iraq policy in
Washington (David Satterfield), the Iraq Reconstruction Management Office (IRMO)
head within the U.S. embassy who is expected to set requirements and priorities for
reconstruction (Ambassador Joseph Saloom), and the newly appointed Coordinator
for Economic Transition in Iraq expected to help the Iraqis use their resources in
conjunction with U.S. assistance to meet Iraqi reconstruction needs (Ambassador
Timothy Carney).
The request for operational costs associated with Iraq reconstruction would be
changed by the House measure. PRT operational support contained in the
Administration’s revised request for the DOD Iraq Freedom Fund is neither funded
nor addressed. PRT operational funding under the State Department would be cut
by $33.3 million to $380.8 million, while the appropriation for the SIGIR would
increase by $10.5 million to $45.5 million. The legislation would also extend the
life-span of the SIGIR by including, for the purpose of calculating its termination
date, FY2007 and FY2008 reconstruction funds from any account in the definition
of the IRRF. Currently, the SIGIR terminates ten months after 80% of the IRRF and
FY2006 funds are expended. The Committee’s report notes that it intends FY2007
supplemental funds to be under the program authority of the SIGIR. However, the
bill does not accordingly amend the SIGIR’s current authorization.
In a March 19 Statement of Administration Policy, the Administration objected
to the House cuts in proposed PRT programs and operations, arguing that PRT
activities are necessary to create a self-reliant Iraq. The Administration also opposed
a provision establishing an Iraq reconstruction coordinator, noting that a coordinator
already exists.
The version of H.R. 1591 approved by the Senate on March 29 (S. 965/S.Rept.
110-37) would provide $6,491.05 million, $143 million less than the Administration
request. Four accounts are changed from the request. The Senate provides $1.524
billion in ESF, $548 million less than the request. Most notably, the Senate bill cuts
$60 million from the PRTs, adds $50 million to the CAP, and cuts $518 million from
political, mostly democracy, activities. Compensating to some extent for the political
cuts, however, is the addition to the Democracy Fund, not requested by the
Administration, of $385 million for democracy activities in Iraq. When this Fund is
taken into account, the cut in broad ESF-type activities is $160 million less than the
request.

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In addition, the INCLE account is set at $150 million — with $50 million cut
from prison construction. The MRA account is increased by $50 million to a level
of $65 million in view of the recent increases in displaced people. And IDFA is
increased by $20 million to a level of $65 million. Unlike the House, the Senate bill
matches the Administration revised request for $100 million under the Iraq Freedom
Fund to support Iraqi state-owned enterprises. The Senate measure contains the same
conditions on providing most economic assistance as the House version. The Senate
bill reconfigures the termination date of the SIGIR to include FY2007 funds, but,
unlike the House, does not include FY2008 funds. Like the House, the Senate
Committee report supports the extension of the SIGIR’s oversight authority without
providing the necessary legislative language to accomplish that end.
With regard to operational costs, the Senate bill cut the State portion of PRT
costs by $41.4 million to a level of $372.7 million, but agreed to the revised request
of $150 million under the DOD Iraq Freedom Fund for PRT support costs. The
Committee met the Administration request for the SIGIR and added $3 million for
the USAID Inspector General’s activities in Iraq. In its report, the Committee also
noted its support for a longer-term presence in Iraq by the Government
Accountability Office (GAO).
Oil Resources
Oil revenues have been a critical element in reconstruction funding. Prior to the
war, the Administration had expected that Iraq’s oil reserves would help it “shoulder
much of the burden for [its] own reconstruction.”6 The May 22, 2003, U.N.
Resolution 1483 which ended sanctions permitted the occupying coalition to use oil
reserves for more long-term reconstruction purposes. The resolution shifted
responsibility for oil profits and their disbursal from the U.N. to the United States and
its allies by establishing a Development Fund for Iraq (DFI) held by the Central Bank
of Iraq and into which oil profits and other Iraqi assets would be deposited.7
During the occupation, DFI funds available to the CPA — $20.7 billion by June
28, 2004 — were used to support a wide range of reconstruction activities, including
the currency exchange program, oil and electricity infrastructure repair, purchase of
firefighting equipment, the Iraqi operating budget, and the Oil for Food Program’s
monthly food baskets, responsibility for which was transferred from the U.N. to the
CPA in November 2003.
6 Press briefing by Ari Fleisher, White House, February 18, 2003; Sec. 1506 Report to
Congress, July 14, 2003, p. 4.
7 On March 20, 2003, President Bush issued an executive order confiscating non-diplomatic
Iraqi assets held in the United States, an estimated $1.74 billion worth available for
reconstruction purposes. Another $927 million in assets located by the United States in Iraq
were also used for these purposes. In addition, foreign governments were reported to hold
an estimated $3.7 billion in seized or frozen assets, of which $847 million had been
deposited in the DFI by June 28, 2004. Security Council Resolution 1511 urged member
states to deposit seized assets in the DFI.

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CRS-9
Under Security Council Resolution 1546, adopted on June 8, 2004, the
transitional government of sovereign Iraq obtained control over use of DFI funds.
Oil production accounts for more than 90% of the Iraqi government revenue.
However, even with a rise in oil prices, estimated 2006 revenue — about $32 billion
— does not cover operating expenses (the deficit is estimated at nearly $3 billion),
putting significant constraints on amounts of funding available to the government for
reconstruction programs.8
Recognizing the importance of oil revenue to Iraq reconstruction, more than
$2.5 billion of total U.S. reconstruction funding has been devoted to efforts to restore
and expand oil production infrastructure. Oil exporting resumed in mid-June 2003,
but oil production was slowed by sabotage and corruption. In September 2004, rates
of production reached a peak of 2.67 million barrels/day compared with an estimated
pre-war rate of 2.5 million barrels/day, but rates have fallen since then and, as of
early April 2007, stand at 2.1 million barrels/day. The CPA target had been 2.8-3.0
million barrels/day by end of 2004. The Iraqi government had hoped to raise
production to at least 2.5 million barrels/day in 2006.9
After paying for operating budget expenses and a variety of government social
programs, very little of Iraq’s oil revenue has been left for reconstruction. Fuel and
food subsidies as well as support for state-owned enterprises are said to account for
as much as $11 billion annually. Because these practices divert funds from needed
reconstruction for which the United States might have to compensate, Administration
officials have repeatedly pressured the Iraqi transition government to face the need
to address the subsidy issue. As part of its agreement with the IMF pursuant to a debt
reduction with the Paris Club, Iraq in mid-December 2005 began to take steps to end
its subsidy of gasoline, increasing the price of fuel from 5 cents to its current roughly
30 cents a gallon.10
A further concern regarding the amount of oil income available for
reconstruction is the extent of corruption and mismanagement in the Iraqi
government. An audit of the DFI undertaken on behalf of the International Advisory
and Monitoring Board (IAMB) found that controls over export earnings are
ineffective and funds are improperly accounted for by government staff. The
Comptroller General of the GAO has also suggested that there is “massive
corruption” in the Oil Ministry. Iraq ranks next to the bottom on Transparency
International’s corruption index.11
8 Economist Intelligence Unit, Country Report for Iraq, November 2006 update.
9 Department of State, Iraq Weekly Status Report, April 4, 2007. “Iraqis Look to Raise Oil
Output Next Year,” Financial Times, December 29, 2005.
10 “At Gas Stations in Iraq, Price Hike Fuels Outrage,” Washington Post, December 28,
2005; “Despite Crushing Costs, Iraqi Cabinet Lets Big Subsidies Stand,” New York Times,
August 11, 2005; “Iraqi Economy Adds to Tensions with U.S.,” Financial Times, July 7,
2005; “Iraqis Reluctant to End Love Affair with Fuel Subsidies,” Financial Times, June 13,
2005.
11 “Iraq Rated Amongst Most Corrupt,” International Herald Tribune, November 6, 2006;
(continued...)

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CRS-10
Finally, it appears that Iraqi ministries are having difficulty spending the
revenue on capital projects such as roads, schools, and oil production. According to
U.S. officials, only about 40 percent of the 2006 capital budget of about $6 billion
was utilized, and one U.S. government official has noted that only ten percent of a
$3.5 billion capital budget available to the Oil Ministry was spent in 2006. Among
the reasons for this situation has been a rapid turnover in personnel, security
concerns, lack of skills in contracting and managing projects, and a fear of being
accused of corrupt practices.12 Complementing the Administration’s new strategy for
Iraq, the Iraqi government has approved a 2007 budget containing $10.5 billion for
capital investment, of which $2.4 billion is expected to go to provincial governments.
PRT assistance is partly aimed at helping the government at the local level develop
the capacity to efficiently utilize these Iraqi-owned resources. The 2007 Iraq budget
also includes $2.4 billion for investments in oil production and another $3 billion for
the construction of new oil refineries to reduce oil product imports.
Iraqi Debt
At the time of the invasion, Iraq’s debt, both public and private, was estimated
at $125 billion.13 Since then, the United States has argued that any new Iraqi
government should not be burdened with debts associated with the policies of its
previous ruler and has supported a near total forgiveness of debt. Some large holders
of Iraqi debt — France, Germany, and Russia for instance — were more inclined to
reschedule debt than to forgive it, arguing that, as an oil rich country, Iraq could
afford someday to pay its debts.14
Several steps led to a partial resolution of the debt issue. A series of meetings
in early 2004 between the President’s personal envoy for Iraq debt reduction, former
Secretary of State James Baker III, and the leaders of debt-holding countries led to
statements of support, but no firm commitment, for varying levels of relief. By
September 2004, Iraq had both assumed sovereignty and cleared its overdue financial
obligations to the IMF, making it easier for Iraq to negotiate an agreement with
private and government creditors. Further, Congress authorized $360 million (P.L.
108-309) to cover the costs of cancelling the roughly $4 billion Iraqi debt obligation
owed the United States. These factors culminated in an agreement by the 19 Paris
Club government creditors on November 20, 2004, to write off roughly $32 billion
in Iraqi debt, 80% of what it owed to this group. In addition to Paris Club creditors,
11 (...continued)
“Corruption Cited in Iraq’s Oil Industry,” Washington Post, July 17, 2006; “An Audit
Sharply Criticizes Iraq’s Bookkeeping,” New York Times, August 12, 2006.
12 “Oil Revenues are in the Billions, but Iraq is Failing to Spend Them,” New York Times,
December 11, 2006; Ambassador Joseph Saloom, DOD News Briefing, March 1, 2007;
Ambassador David Satterfield, State Department Teleconference, February 7, 2007.
13 Based on Paris Club data. Does not include $29 billion in unpaid Gulf War reparations.
International Monetary Fund, Iraq: Use of Fund Resources — Request for Emergency Post-
Conflict Assistance, September 24, 2004.
14 G-7 Agrees That Iraq Needs Help with Debt,” Washington Post, April 13, 2003;
“Restructuring, Not Forgiveness,” Financial Times, April 15, 2003.

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CRS-11
Iraq owes about $67 billion in other bilateral debt (mostly to Gulf States countries)
and $20 billion in commercial debt. Of the latter, about $16 billion is expected to be
forgiven in the near future.15
Other Donors
Immediately following the U.S. intervention in Iraq, U.N. appeals for postwar
humanitarian relief to Iraq met with $849 million in grant donations from non-U.S.
donors.16 Additionally, the Madrid donor conference, held on October 23-24, 2003,
produced a minimum total of $13.6 billion in reconstruction aid pledges from more
than forty other donors. Later pledges have raised the total non-U.S. reconstruction
aid offer to $15.2 billion as of end December 2006.17
Of this reconstruction assistance, grant aid pledges from other donors total
roughly $5.1 billion. These include $1.5 billion by Japan, $642 million by the United
Kingdom, $222 million by Spain, $905 million by the European Commission, $200
million by South Korea, and $236 million by Italy. About $10.1 billion in loans have
been offered, including by Japan ($3.5 billion), the World Bank ($3.0 billion), the
IMF ($2.6 billion), and the Islamic Development Bank ($500 million). Of all these
pledges, as much as $3.8 billion has been disbursed, much of it as a contribution to
the IRFFI (see below).18
Japan and Britain have been notably active in providing bilateral assistance.
Japan, the second largest donor after the United States, has already spent most of the
$1.5 billion in grant aid it pledged and has developed projects for use of $1.6 billion
of a $3.5 billion concessional loan. Among other things, it has provided significant
funding for electrical power station rehabilitation, water treatment units and tankers,
medical equipment, and firetrucks and police vehicles. The loan is funding port and
power plant rehabilitation and irrigation improvements. Britain has offered
considerable technical assistance and related support for improvements in the justice
system, governance, and economic policy.
Among multilateral contributions, the IMF continues to offer a $297 million
Emergency Post-conflict Assistance package and a $475 million Standby
Arrangement on which Iraq can draw, but has yet to do so. The World Bank has
allocated $235 million of a $500 million concessional loan program, including a
$100 million education project.19
15 State Department, 2207 Report to Congress, January 2007, Appendix II-14. See CRS
Report RL33376, Iraq’s Debt Relief: Procedure and Potential Implications for International
Debt Relief, by Martin A. Weiss for further details.
16 Includes appeal and outside-appeal aid from all donor countries, except the United States.
U.N. Office for the Coordination of Humanitarian Affairs. Total Humanitarian Assistance
for Iraq Crisis 2003. April 5, 2004.
17 SIGIR, Report to Congress, January 30, 2007, p. 119.
18 SIGIR, Report to Congress, January 30, 2007, p. 117-125.
19 SIGIR, Report to Congress, January 30, 2007; “Iraq: World Bank Approves First IDA
(continued...)

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CRS-12
Iraq Trust Fund. During much of the occupation, donors had been reluctant
to contribute to reconstruction because they had no say in where the funds are to be
allocated.20 To deal with this concern, a multi-donor trust fund, the International
Reconstruction Fund Facility for Iraq (IRFFI), was established on December 11,
2003. It encourages contributions by keeping them outside the control of the United
States, but supports needs identified in the World Bank needs assessment and
approved by the Iraqi government. The Facility has two windows, one run by the
Bank (the World Bank Iraq Trust Fund) and one by the United Nations (UNDG Iraq
Trust Fund). As of December 31, 2006, donors had deposited about $1.6 billion to
the Facility. The World Bank Fund ($455 million deposited) has financed textbooks,
school rehabilitation, and water and sanitation infrastructure, and has provided
hundreds of Iraqi civil servants with management training. The UNDG Fund ($1.1
billion deposited) is supporting a wide range of projects, most to be implemented by
the Iraqi government.21
United Nations. In addition to the above donor projects, the United Nations,
since its return to Iraq in early 2004, has been largely responsible for providing
assistance and guidance to assist the democratization of Iraq, including support to the
transitional government and the Iraqi Electoral Commission. U.N. envoy Lakhdar
Brahimi helped negotiate the transition to sovereignty, and a U.N. team headed by
Carina Perelli assisted the implementation of elections for the National Assembly,
successfully held on January 30, 2005. With U.N. assistance the electoral law was
drafted, thousands of registrars were trained, 540 registration centers were set up
around the country, millions of ballots were printed, 5,300 voting centers established,
and thousands of poll watchers trained. Much of the U.N. election work was
conducted from outside Iraq, with only about 40 expatriates in Iraq and 600 Iraqi
employees implementing activities. Subsequently, the U.N. helped with the
constitution-writing process, the constitutional referendum, and the December 2005
parliamentary election. With Trust Fund support, the development organizations
within the United Nations are actively working on dozens of projects. There are
about 800 U.N. international and local staff in Iraq.22 U.N. Security Council
Resolution 1700, approved August 10, 2006, extends the U.N. Mission for Iraq
(UNAMI) another year and calls on the U.N. to continue to play a leading role in
assisting Iraq.
In response to a continuing U.S. effort to encourage greater levels of donor
contributions, the U.N. and Iraq, on July 27, 2006, launched an International
19 (...continued)
Credit,” World Bank News Release, November 29, 2005.
20 “U.S. Seeks Help With Iraq Costs, But Donors Want a Larger Say,” New York Times, July
14, 2003; “Bush’s Plea for Iraq Aid Falls on Deaf Ears,” Financial Times, September 25,
2003.
21 IRFFI website [http://www.irffi.org].
22 Kofi Annan, “There’s Progress in Iraq,” Washington Post, June 21, 2005; “United Nations
to Set Up Trust Fund for Iraq,” Washington File, November 30, 2004. “U.N. Says Mission
Accomplished and That Legitimacy is Now in Hands of Iraqis,” New York Times, January
26, 2005.

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CRS-13
Compact with Iraq. Under this initiative, participating donor countries would pledge
a certain threshold of funds. In return, Iraq would promise a five-year program of
specific reforms and actions leading to long-term economic and political
development. The Compact is expected to be finalized at a donor meeting in the near
future.
U.S. Assistance Policy and Program Structure
On June 28, 2004, the Coalition Provisional Authority (CPA), the agency
established to temporarily rule Iraq and implement reconstruction programs, was
dissolved as Iraq regained its sovereignty. At that time, broad responsibility for
assistance programs moved from the Secretary of Defense to the Secretary of State.23
At the Department, the Senior Advisor and Coordinator for Iraq is David Satterfield.
In Iraq, the United States provides assistance and, to the extent possible, policy
guidance to the Iraqi government through its U.S. embassy. Ryan Crocker is the
Ambassador. The embassy employs about 1,000 U.S. direct hire staff. An Iraq
Reconstruction Management Office (IRMO) within the U.S. embassy has supplanted
CPA assistance efforts in setting requirements and priorities. It is headed by
Ambassador Joseph A. Saloom. Under the President’s new strategy for Iraq, a new
Coordinator for Economic Transition in Iraq, Ambassador Timothy Carney, has been
appointed to serve in Baghdad to help integrate assistance with military strategy and
ensure that both U.S. and Iraqi reconstruction funds are effectively spent.
Responsibility for the activities of the Project and Contracting Office (PCO),
formerly the CPA’s Program Management Office (PMO), has been taken over by the
Army Corps of Engineers, Gulf Region Division (GRD), headed by Brig. Gen.
Michael J. Walsh.24 The GRD-PCO is chiefly responsible for the roughly $10 billion
in FY2004-funded IRRF programs dedicated to infrastructure construction. The
GRD/PCO coordinates, manages and monitors contracting and expenditures in six
sectors — transport and communications; electricity; buildings/health;
security/justice; public works/water resources; and oil. Although in the Department
of the Army, it reports to the Department of State as well as to the Department of the
Defense.
Immediate overall responsibility for management of U.S. military activity in
Iraq belongs to Gen. David H. Petraeus, commander of the multinational forces in
Iraq. He also serves as principal military adviser to the U.S. ambassador. With the
policy guidance of the Ambassador, Gen. Petraeus is responsible for providing
training and support to Iraqi security forces. Maj. Gen. Martin E. Dempsey is the
officer immediately responsible for overseeing the organization and training of all
Iraqi security forces, including roughly $5 billion in IRRF funds and all $10.4 billion
of ISFF funds. Although the State Department had assumed control of technical
23 According to National Security Presidential Directive (NSPD) of May 11, 2004. It made
the Secretary of State responsible for “continuous supervision and general direction of all
assistance for Iraq.”
24 The PCO and IRMO were established by the May 11, 2004 NSPD. See GRD-PCO website
at [http://www.rebuilding-iraq.net].

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CRS-14
assistance provided to the different Iraq ministries, in October 2005 it ceded
responsibility to DOD for the two ministries most closely involved in security
matters — Interior and Defense. Among reasons given for this switch are that DOD
has greater resources at its disposal and that State has had difficulty filling advisor
positions in these ministries, the latter point disputed by some. In most other
countries, State has responsibility for training police forces.25
A third major U.S. actor in the implementation of the aid program is the U.S.
Agency for International Development (USAID). Responsible for about $5.2 billion
of assistance to date, USAID manages a wide range of economic, social, and political
development programs. Its programs have included a $2.7 billion construction
project contracted to Bechtel and most activities related to public health, agricultural
development, basic and higher education, civil society, local governance,
democratization, and policy reform.26
The post of CPA Inspector General, created under the FY2004 Emergency
Supplemental legislation (P.L. 108-106), was redesignated the Special Inspector
General for Iraq Reconstruction (SIGIR) by the DOD Authorization for FY2005 (P.L.
108-375). Special Inspector General Stuart Bowen, Jr., reports to both the Secretary
of Defense and State. The SIGIR office has about 60 employees examining a range
of issues, including the extent and use of competition in contracting; efficient and
effective contract management practices; and charges of criminal misconduct. The
SIGIR issued his first report to Congress regarding his audits and investigations on
March 30, 2004, and has reported quarterly since then.27
P.L. 108-375 extended the SIGIR beyond its originally mandated December
2004 expiration and granted operational authority until 10 months after 80% of the
reconstruction funds were obligated. The FY2006 Foreign Operations appropriations
(P.L. 109-102) permitted it to function until 10 months after 80% of FY2004 IRRF
funds were expended (to date, 80% has been expended). The FY2007 Defense
Authorization (H.R. 5122/P.L. 109-364) made all FY2006 reconstruction
appropriations, regardless of account, subject to SIGIR jurisdiction as though they
were under the IRRF. But it also contained a provision terminating the SIGIR office
on October 1, 2007. P.L. 109-440, signed on December 20, 2006, terminates the
SIGIR 10 months after 80% of IRRF funds are expended. However, in its definition
of IRRF funds, the legislation includes all IRRF funding as well as any FY2006
funds made available for reconstruction purposes regardless of funding account,
including ISFF and ESF. In effect, the legislation extends the life of the SIGIR into
2008.
The House version of the FY2007 supplemental, H.R. 1591, would add FY2007
and FY2008 funding to the definition of IRRF for purposes of determining the SIGIR
termination date. The Senate Committee version would include only FY2007. Both
House and Senate Committee reports have indicated they also expect SIGIR authority
25 “Aid to Iraq Ministries to Shift to Pentagon,” Washington Post, September 26, 2005.
26 USAID, Bi-Weekly Update, January 8, 2007.
27 See [http://www.sigir.mil/] for reports and audits.

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CRS-15
to include FY2007 reconstruction funding irrespective of funding account, but they
do not address the issue with legislation.
U.S. Reconstruction Assistance
Among the key policy objectives laid out by the Bush Administration is the
economic and political reconstruction of Iraq. Discussion and debate have been
ongoing regarding the strategy to reach these ends utilizing reconstruction aid funds
and the effectiveness of aid implementation.
Reconstruction Priorities
Reconstruction priorities have changed over time, mirroring shifting events on
the ground. For example, in November 2003, when the CPA decided to accelerate
the hand-over of sovereignty, it immediately revised the allocation of FY2004 IRRF
appropriations that had been legislatively mandated only weeks previously in order
to increase substantially the democratization effort — from $100 million to $458
million. A review conducted by the new U.S. Embassy country team after the State
Department took charge of Iraq non-military policy in June 2004 led to a substantial
reallocation of FY2004 IRRF resources.28 The review identified security needs,
increased oil production, greater employment, and democracy as the highest
priorities, while suggesting that many large-scale economic infrastructure projects
were too slow and dependent on an improved security situation to have an immediate
impact.
As a result, security — mostly training and equipping Iraqi forces — increased
by $1.8 billion. Efforts to increase oil production capacity gained $450 million.
Employment creation — mostly USAID labor-intensive local road, clean water, and
other improvement projects — received an additional $280 million. Democracy
programs geared toward assisting the pending elections grew by $180 million.
General development programs — mostly conducted by USAID in the areas of
economic reform, private sector development, and agriculture — increased by $380
million. These additional amounts were drawn from three sectors to which the funds
had originally been allocated but not yet obligated — purchases of already refined
imported oil (-$450 million), water and sewerage (-$1.935 billion), and electricity
28 Although most changes to IRRF allocations were simply subject to the usual
appropriations committee notification procedures, Congress had to approve allocation
changes legislatively when they surpassed FY2004 supplemental restrictions limiting
increases to specific sectors to no more than 20% and decreases to no more than 10% from
the original congressional allocation. The 2004 Embassy review was approved by Congress
in the FY2005 Continuing Resolution (P.L. 108-309). In the FY2006 Emergency
Supplemental, Congress again re-set the sector allocation baseline in order to give the
Administration additional programming flexibility. It also made remaining IRRF funds
available for re-obligation for one year beyond the previous expiration date of end of
FY2006 as long as they were initially obligated by end of September 2006. All but roughly
$382 million had been obligated by that time.

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CRS-16
(-$1.074 billion) — all sectors where the benefits of planned large-scale projects
were viewed as too long-term to make an immediate difference.
There have been regular reviews of priorities and reallocations since then. Most
of the reallocated funds have come from canceled long-term energy and water
projects. Although reallocations are pragmatic responses to new events on the
ground, their cumulative impact has been to divert funds from previously planned
programs. The SIGIR has determined that, of 136 projects originally planned in late
2003 for the water sector, only 49 will be completed. Mostly eliminated have been
projects in sewerage, irrigation, and dams. Of 425 projects planned in the electricity
sector, only 300 will be completed.
Recent reallocations have been comparatively small as amounts available have
dwindled. As of the end of September 2006, IRRF funds are no longer available for
obligation, and large-scale infrastructure programs will no longer be funded.29
Funding for the training and equipping of Iraqi security forces is being met out of the
ISFF and economic reconstruction programs are being addressed mostly with ESF
account funds from the FY2006 supplemental and FY2007 regular budgets. The
major elements of current non-security assistance are as follows:
! Infrastructure Sustainability. As more large-scale construction
projects have been completed with U.S. assistance, there has been
increasing concern regarding the financial, organizational, and
technical capacity of Iraqis to maintain them in the long run.
Assistance is provided to help Iraqis operate, maintain, and sustain
these projects. In the past, this has been accomplished largely by
providing training and replacement parts. In addition, assistance is
provided to help secure threatened oil, electricity, and water
infrastructure.
! Provincial Reconstruction Teams (PRTs). Following the example
established in Afghanistan, the State Department has set up 10 PRTs
throughout Iraq (see below for details) that work with Iraqi local
governments to identify economic and political development
projects that can be implemented with U.S. financing. Funding is
disbursed by the PRTs to stimulate short-term employment for
young adults and support local government development, among
other things.
! Governance. A number of efforts support governance,
democratization, and rule of law programs at all levels of
government in Iraq, including helping Iraqi ministries improve their
ability to operate, providing security for judges, and supporting
USAID’s well-regarded Community Action Program (CAP), as well
as a variety of democracy and rule of law NGOs.
29 According to the Administration, the remaining un-obligated FY2004 funds (about $437
million) will be used for “upward adjustments and limited in-scope changes to complete
existing contracts.” 2207 Report to Congress, October 2006, p. 1.

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CRS-17
Sustainability, PRTs, and governance remain key features of the three Administration
budget requests made in February 2007.
Table 3. Iraq Relief and Reconstruction Fund (IRRF)
($ millions)
Current
Obligations as of
Sector
allocation
April 3, 2007
Exp.
FY2004 Supplemental (P.L. 108-106)
Security and Law Enforcement
5,003
4,977
4,734
Justice, Public Safety, and Civil
1,304
1,298
1,037
Society
Democracy
999
998
920
Electricity
4,217
4,034
3,185
Oil Infrastructure
1,725
1,580
1,400
Water and Sanitation
2,116
1,966
1,539
Transport and Telecommunications
457
451
350
Roads, Bridges, Construction
334
323
217
Health
816
800
650
Private Sector
814
809
781
Education, Refugees, Human Rights,
410
401
357
Governance
Administrative Expenses
213
210
186
Total FY2004 Supplemental
18,406
17,849
15,357
FY2003 Supplemental
2,473
2,232
2,139
(P.L. 108-11)
Total IRRF
20,880
20,082
17,496
Sources: Department of State, Iraq Weekly Status Report, April 4, 2007.
Reconstruction Programs and Issues
Status. Reconstruction programs have shown mixed results to date. There are
many positive outputs, such as schools rehabilitated, vaccinations provided, and so
on, in arguably the most critical sectors — electric power and oil production.
However, the outputs have been less than originally envisioned. Moreover, the
impact of these projects on Iraq is hard to estimate, and the extent to which they and
other-donor contributions meet the total needs of Iraq has not been fully assessed.
Although mismanagement and corruption play a large role in diminishing returns
from reconstruction efforts, it has been the lack of stability and the effects of the
insurgency that have most affected the course of reconstruction to date.

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CRS-18
A brief review of each reconstruction sector:30
! Security and Justice. About 331,000 police and military security
forces have been trained and equipped. Reports indicate, however,
that many are insufficiently trained to required levels of competence
or unwilling to carry out assigned duties. Additional challenges are
the efforts to develop logistics capabilities in the Iraqi Army and
infrastructure protection forces. More than 1,200 facilities — police
stations, border forts, fire stations, courts, etc. — have been
completed. IRRF funding in these sectors has been superseded by
the ISFF.
! Healthcare. The focus of this sector has been to rehabilitate and
equip facilities and provide medical services such as immunizations.
Health care providers have been trained and facilities equipped. The
immunization program has been a success, with nearly 98% of
children under five immunized against polio. Many construction
projects experienced considerable delays and contracts won by U.S.
firms had to be revoked and re-awarded to Iraqis. Of 20 hospitals
being refurbished, 12 were completed by the original contractor and
the rest re-awarded to Iraqis. Only 7 of a planned 142 new clinics
will be finished by the original contractor. Further, the Basrah
Children’s Hospital has had significant cost overruns.
! Transportation and Communications. Key results in this sector
are the restoration of the deepwater port at Umm Qasr, and repairs
on 90 of 98 railway stations, as well as two international and three
regional airports. Although the port has shown considerable activity,
only a tiny percentage of Iraqi trains run because of security
concerns. The SIGIR notes that road repairs are only targeting a
very small percentage of total road and bridge work required (for
example, only 8 repaired bridges of 1,156 in poor condition or
destroyed). While U.S. assistance has supported modernization of
the postal service and rebuilding of the landline telephone network,
the strongest advance was due to the private sector provision of
mobile phone technology, helping to raise total phone users from
913,000 to over 9 million.
! Democracy, Education, Agriculture and Private Sector
Development. About 5,270 schools have been rehabilitated and
60,000 teachers trained. Local governance was strengthened through
establishment of councils and community associations. More than
3,475 grassroots projects have been conducted through USAID
grants provided to hundreds of community action groups. Voter
education, training of election monitors, and related activities
30 SIGIR, Report to Congress, January 30, 2007, p. 25-107; Department of State, 2207
Report to Congress, October 2006; Department of State, Iraq Weekly Status Report, April
4, 2007.

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CRS-19
contributed to three successful elections in 2005. Irrigation systems
were rehabilitated, 68 veterinary clinics reconstructed, and 83,500
date palm offshoots were planted. Technical experts provide advice
to government regarding adoption of possible economic reforms and
credit is provided to micro and small business. All these sectors
have nearly run out of IRRF funding and must look to ESF, CERP,
and other accounts for continuing activities.
! Electricity. U.S.-funded projects have added 2,817 megawatts
(MW) to Iraq’s generating capacity. Before the war, electric power
was 95,600 megawatt hours (MWh); now, it is close to 90,000
MWh. The goal was originally 120,000 MWh. In Baghdad, Iraqis
receive fewer hours of electricity than before the war (averaging
about 7 hours in early April); elsewhere they receive more than
previously (about 12 hours). In addition to the impact of insurgent
activity, other challenges to the growth of electrical power are the
rising demand for electricity, a lack of centralized monitoring and
control systems, poorly maintained infrastructure, and a shortage of
fuels to operate power plants.
! Oil and Gas. Oil and gas production has remained stagnant and
below pre-war levels for some time. The pre-war level of oil
production was 2.5 million barrels/day; it currently stands at 2.1
million barrels/day. The goal was 2.8-3.0 million by end of 2004.
According to the SIGIR, poor infrastructure, corruption, and
difficulty maintaining and operating U.S.-funded projects join the
destruction caused by the insurgency as major challenges. All U.S.
assistance projects in this sector will be completed by August 2007.
! Water and Sanitation. Water and sanitation sector assistance,
according to the IRMO, has provided clean water to 5.4 million
more people and sanitation to 5.1 million more than before the war.
Infrastructure Sustainability. As more large-scale construction projects
— power plants, water and sanitation systems, oil facilities, etc. — are completed,
there has been increasing concern regarding the ability of Iraqis to maintain and fund
their operations once they are handed-over to Iraqi authorities. A “principal
objective” of PCO contracting has always been the “swift transition of the
reconstruction effort to Iraqi management and control.”31 To insure long-term
sustainability, the PCO and IRMO are focusing on what they call capacity
development — providing training to the appropriate personnel in the labor force
who will operate and maintain facilities and insuring sufficient funds are available
for repairs and equipment replacement following project completion. At the Ministry
level, the IRMO is assisting development of policies and laws conducive to efficient
31 Iraq Reconstruction Pre-Proposal Conference Briefing Slide Show, DOD, Jan. 21, 2004.

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CRS-20
use and maintenance of infrastructure. The SIGIR has pressed the embassy to
encourage ministries to develop strategic plans for sustainment of its infrastructure.32
According to the SIGIR, the State Department has identified $425 million in
IRRF funds that have been already been spent or are programmed to be used to help
sustain projects. In addition, the FY2006 supplemental provides $355 million for
this purpose. Another $134 million was requested in the FY2007 budget.
The long-term responsibility for sustainability, however, lies with the Iraqi
government, and the IRMO has estimated that it would cost about $1.2 billion
annually to operate and maintain U.S.-sponsored projects.33 Whether the Iraqi
government can shoulder the burden of additional costs will likely depend on the
level of resources it is able to draw on from oil profits and international donors.
Ministerial Capacity Development (MCD). Much effort and assistance has
gone into improving the capabilities of government ministries, including equipping
and training personnel at all levels of service. Ministry officials and staff, however,
remain deficient in knowledge of modern administrative systems and management
practices. The SIGIR has noted that, because there is no single organization
responsible for the reconstruction effort, the capacity building program has gone
without an integrated plan providing coordination and priorities to the multiple
organizations responsible for it. The FY2006 supplemental provided $125 million
in additional funds for MCD, and both the FY2007 supplemental and FY2008
emergency requests include what they call National Capacity Development
components.34
Provincial Reconstruction Teams (PRTs). In an effort to expand
outreach to the provinces and strengthen local government, the U.S. Embassy, in
mid-2005, began establishing Provincial Reconstruction Teams (PRTs). The PRTs
are made up of Embassy, PCO, USAID, military, and other agency staff, between 35
and 100 members in each. Ten PRTs have been established in Kirkuk, Ninewa
(Mosul), and Babil (Hillah), as well as in Baghdad, Anbar, Diyala, Salah-ad-Din,
Basrah, Nasiriyah, and Irbil (for all of Kurdistan). The latter three PRTs are British,
Italian, and South Korean-led respectively.35

The intention has been that the PRTs would work together with local and
national Iraqi government representatives to identify projects that can be
implemented and carried out with U.S. financing. It is anticipated that, as a result of
32 Briefing by PCO on Capacity Development, March 17, 2005; State Department, 2207
Report to Congress, October 2006, p. 4.
33 SIGIR, Transition of Iraq Relief and Reconstruction Fund Projects to the Iraqi
Government, Audit 06-017, July 2006.
34 SIGIR, Status of Ministerial Capacity Development in Iraq, Audit 06-045, January 30,
2007.
35 Department of State, Iraq Weekly Status Report, December 20, 2006; Department of
State, 2207 Report to Congress, October 2006, p. 5. “Military to Protect U.S. Aid Teams
in Iraq,” Washington Post, April 14, 2006.

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CRS-21
this collaboration, local governments may be strengthened while U.S. projects
achieve more lasting support. The PRTs also work closely with provincial
governments to strengthen their capacities and enable them to better interact with the
central government as well as to more effectively utilize the Iraqi government funds
that have been allocated to each province. An additional expected benefit of the
PRTs is that U.S. agencies may better coordinate their reconstruction programs.
In its June 2005 review of resources, the IRMO allocated $241 million of IRRF
funds to back the PRTs — $80 million used through the CERP and $161 million
through USAID’s Community Action Program (CAP) and Local Governance
Program (LGP). According to the IRMO, by October 2006, $103.5 million in IRRF
funds had been used to support 135 PRT identified projects, mostly in the electrical,
road and bridge construction, and water sectors. The FY2006 supplemental added
$307 million in ESF funds to be disbursed by the PRTs to assist provincial
government delivery of essential services, $155 million for the USAID LGP, and
$135 million for a community stabilization program that seeks to create jobs to
alleviate causes of conflict in strategic cities.
The PRTs are a key element in the President’s new strategy for Iraq announced
in January 2007. That plan includes funding to expand the number of PRTs to
between 18 and 20 and the number of civilian staff from 250 to 400.36 PRTs in
Baghdad would increase from one to six and in Anbar province from one to three.
Greater effort would be made to integrate civilian teams with U.S. military battalions.
In essence, the strategy envisions that, as U.S. and Iraqi military forces clear an area
of Baghdad or Anbar, PRT staff would immediately work with local Iraqis to further
stabilize the area by drawing on all available spigots of U.S. and Iraqi government
funding to create jobs and meet other needs.
There have been security and staffing constraints to the work of PRTs, however,
that might also pose problems for the expansion plan. One reason there had been
limited grassroots development work in the provinces up to the creation of the PRTs
is the lack of security. Although originally reluctant to divert the necessary
manpower from its other responsibilities, the Department of Defense agreed to
provide protection to the PRTs. A Memorandum of Understanding to this effect was
signed in November 2006. However, according to the SIGIR, minimum “movement”
by PRT personnel has required three armored vehicles and eight “shooters.” Normal
business is, therefore, difficult — the SIGIR reported in October 2006 that many PRT
members could not regularly meet with local government officials to carry out their
capacity-building chores; and in the two locations where coalition military provide
security, due to U.S. rules forbidding their use, U.S. personnel generally could not
leave their compounds. Further, a former PRT diplomat who left in January 2007 has
suggested that local Iraqis are too intimidated to meet with U.S. staff. She noted that
a town council in Diyala province had not had a quorum since October and that
training sessions had been cancelled due to security concerns. In January 2007
congressional testimony, Secretary Rice indicated that civilian staff have been able
to meet regularly with local government personnel and Ambassador Satterfield
36 Ambassador Satterfield, the State Coordinator for Iraq, has suggested that the expansion
is from 290 to “slightly over” 600. Teleconference, February 7, 2007.

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CRS-22
claimed in February 2007 that the SIGIR views on this issue do not reflect current
reality. But a recent article based on PRT foreign service officer reports indicates
that the problem persists.37 Moreover, it suggests that security obstacles facing PRTs
may increase as U.S. troops currently protecting PRT staff hand responsibility for
security over to Iraqi forces.38
A second issue is the availability of qualified U.S. government civilian staff.
Early reports of its first year of operations suggested that State was having difficulty
enticing its personnel to volunteer for PRT posts. According to the SIGIR, DOD
stepped in to provide military civil affairs personnel in place of the State posts, but
required skills for such posts as local government, economic, and agricultural
advisers were not being fully met. That situation appears to be continuing.
Although, in her January testimony, Secretary Rice noted that 98% of positions,
current and anticipated, were filled, it has been reported that about 129 of the new
PRT posts are going to be temporarily occupied by military personnel or civilians
until State is able to recruit sufficient numbers of skilled individuals. Those recruited
in specialized skills will likely be contract personnel, because such skills are not
typically available from either the State or USAID foreign service. As many as 269
such personnel are expected to eventually be needed.39
The Role of Iraqis in Reconstruction and the Plan to Re-start State-
Owned Enterprises. One facet of the U.S. reconstruction effort has been to
attempt to encourage economic growth and decrease unemployment by trying to
utilize Iraqis to the extent possible in the implementation of projects. In 2003-2004,
this involved making Iraqi businessmen aware of contract opportunities and
encouraging U.S. contractors to employ Iraqi firms. Although U.S. government
requirements could be waived for Iraqi contractors, most work for Iraqi business
came in the form of subcontracts for U.S. prime contractors.
When the State Department took over reconstruction in July 2004, however,
greater efforts were made to contract project work directly with Iraqis. By 2005, the
SIGIR estimated that about 70%-80% of new contracting was directly with Iraqis.40
A contributing factor in this effort was the deleterious impact of security on the
activities of the large-scale contractors. In January 2005, Contrack International,
holder of a $325 million roads and bridges construction contract, announced its
37 SIGIR, Status of the Provincial Reconstruction Team Program in Iraq, 06-034, October
29, 2006;”Rice’s Rebuilding Plan Hits Snags,” Washington Post, January 15, 2006;
Testimony to Senate Foreign Relations Committee, January 11, 2007. “Ex-Envoy Says Iraq
Rebuilding Plan Won’t Work,” Reuters, February 17, 2007; Teleconference of Ambassador
Satterfield, February 7, 2007.
38 Shawn Dorman, “Iraq PRTs: Pins on a Map,” Foreign Service Journal, March 2007.
39 Testimony of Secretary Rice to Senate Foreign Relations Committee, January 11, 2007.
“Pentagon Agrees to Help Fill State Department’s Iraq Reconstruction Jobs on Temporary
Basis,” New York Times, February 20, 2007; Teleconference of Ambassador David
Satterfield, February 7, 2007; and Robert Perito, Provincial Reconstruction Teams in Iraq,
United States Institute of Peace, February 2007.
40 Stuart Bowen, Testimony to House Foreign Operations Appropriations Subcommittee,
September 7, 2005.

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CRS-23
withdrawal.41 Consequently, many bridge and road projects were then implemented
directly with the Ministry of Construction, with estimated savings of between 30%
and 40%.42 USAID also used Iraqi Ministry employees to implement electrical
distribution projects in Baghdad. As some U.S. contractors were shown to perform
inadequate work, they were replaced by Iraqi contractors. The PCO claims that
hundreds of Iraqi firms are currently working on U.S.-funded reconstruction
projects, although these numbers are falling significantly as construction projects are
completed. CERP and USAID Community Action Program grants are often designed
to directly employ large numbers of Iraqis, many at the village level. About 71,405
Iraqis are reported to be currently employed under all U.S.-funded projects compared
to nearly 115,000 a year ago.43
Now, nearly four years into the reconstruction program, U.S. defense officials,
seeking to create employment opportunities for Iraqi citizens, are rehabilitating some
of the roughly 200 state-owned enterprises that composed a large portion of the Iraqi
economy prior to the U.S. occupation. Soon after the occupation began, the CPA
attempted to privatize them in an effort to open up a free market economy in Iraq, but
officials gave up on what promised to be a politically unpopular endeavor when the
turnover of sovereignty was accelerated. The Defense Department plan envisions the
production in Iraq of items required by the U.S. military, some of which are currently
produced by neighboring countries. Additionally, U.S. firms have been asked to
consider purchasing supplies from Iraqi enterprises. Since November 2006, three
factories have started-up: one producing Iraqi uniforms, another armored vehicles,
and another household ceramic bathware for domestic Iraqi consumption. DOD
officials think that up to 140 of these enterprises could potentially be viable. To
support this effort, the FY2007 supplemental request includes $100 million in DOD
funding. It would be used to supply generators and other supplies.44
Skepticism has been expressed regarding the DOD plan. Some observers
question the extent to which violence would be reduced as a result of expanded
employment. Some are concerned that the SOEs may provide targets for insurgents.
Others suggest that, unless well-managed, investments in SOEs may provide
opportunities for corruption and political manipulation.45
41 BNA, Inc. Federal Contracts Report, January 11, 2005.
42 Ambassador Jeffrey, Testimony to House Foreign Operations Subcommittee, September
7, 2005. State Department, 2207 Report to Congress, October 2005, p. 3.
43 Department of State, Iraq Weekly Status Report, April 4, 2007, and April 6, 2006.
44 DOD News Briefing with Deputy Undersecretary Paul Brinkley, March 28, 2007; “To
Stem Iraqi Violence, U.S. Aims to Create Jobs,” Washington Post, December 12, 2006;
“Bush to Propose Restoring Iraqi Factories to Create Jobs,” New York Times, January 10,
2007; “Aging and Shut, Iraq Factories May Reopen and Mitigate Ills,” New York Times,
January 18, 2007.
45 United States Institute of Peace, State-Owned Enterprises: Post-Conflict Political
Economy Considerations, March 2007.

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CRS-24
CERP and CHRRP. Drawn from DFI and Department of Defense funds
rather than IRRF appropriations, the Commander’s Emergency Response Program
(CERP) contributes to the reconstruction effort by providing “walking around
money” for U.S. military civil affairs officers throughout Iraq. Up to now, a total of
$2.5 billion — $548 million in Iraqi funds and nearly $2 billion in U.S. DOD
appropriations — has been made available for this purpose. Both House and Senate
versions of the FY2007 Supplemental would add another $350 million to the CERP
program.
The CERP supports a wide variety of reconstruction activities at the village
level from renovating health clinics to digging wells to painting schools, provided in
the form of small grants. In lieu of civilian U.S. government or NGO aid personnel,
who are not present in most of the country, commanders identify local needs and
dispense aid with few bureaucratic encumbrances. The grants have been credited
with helping the military better exercise their security missions, while at the same
time meeting immediate neighborhood development needs. In addition to
reconstruction, CERP funds are used for compensation payments to the families of
killed or injured Iraqis. The Commanders Humanitarian Relief and Reconstruction
Program (CHRRP) uses IRRF funds — $86 million to date — combined with Iraqi
government grants — $136 million — for similar purposes.46
Security. The successful conduct of reconstruction work is contingent on an
environment of order and stability. More than three years since Operation Iraqi
Freedom was launched, violence persists against both U.S. forces and Iraqis. Among
the many effects of the continued instability on the reconstruction effort:
! The instability has hindered implementation of reconstruction
projects. Security threats are preventing PRT personnel from
communicating directly with local governments, construction
workers from appearing at their jobs, and project managers from
monitoring project work.47
! Completed reconstruction projects and pre-existing infrastructure
have been destroyed. For instance, on October 20, 2006, attacks on
the electrical grid cut Baghdad off from the national grid and greatly
reduced its supply. Major pipelines continue to be sabotaged,
shutting down oil exports. Along with criminal activity and poor
equipment, insurgent attacks are estimated to be responsible for the
loss of $16 billion in oil revenue in the past two years.48
46 SIGIR, Report to Congress, January 30, 2007, Appendix G.
47 For example, the SIGIR reports that on March 24, 2006, a project manager received an e-
mail threatening all employees — as a result, no one came to work the next day. SIGIR,
Report to Congress, April 30, 2006, p. 12. SIGIR, Status of the Provincial Reconstruction
Team Program in Iraq, 06-034, October 29, 2006.
48 SIGIR, Report to Congress, October 30, 2006, p. 4; “Iraq Insurgents Starve Capital of
Electricity,” New York Times, December 19, 2006; “Report Details Oil Industry Losses,”
Washington Post, September 29, 2006; “Mortar Attack Shuts Down Refinery,” Los Angeles
(continued...)

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CRS-25
! Reconstruction costs rose substantially due to the need to provide for
security and insurance for personnel. Estimates of the portion of
project costs devoted to security have varied widely. In 2005, the
State Department estimated it at 16%-22%. According to the SIGIR,
USAID projects funded with the FY2003 supplemental were about
20% more expensive than the original estimates. A 2006 SIGIR
survey of major U.S. contractors found security costs to range from
a low of 7.6% to a high of 16.7%. Unanticipated security costs as
well as the related need to shift $1.8 billion from water and power
projects to the training and equipping of Iraqi forces has meant that
funds have been drained from infrastructure programs. Among other
results, USAID cancelled two electric power generation programs;
the Army Corps of Engineers cut a planned 23 electric substation
rehabilitation program to nine.49
! Iraqi government-budgeted funds planned for the operation and
maintenance of U.S.-funded infrastructure projects have had to be
diverted to pay for security forces, increasing the need for U.S.
sustainability assistance.50
! Implementing organizations and personnel have fled. Fearing for
their safety, many aid implementors have been withdrawn from the
country. U.N. and bilateral aid donors have been reluctant to initiate
projects of their own; many are running programs from Jordan or
Kuwait utilizing Iraqi personnel to the extent possible.51
! The quality of aid has likely been negatively affected as
implementors cannot meet with local people and design and monitor
projects as they would in other countries. The pool of foreign
expertise available to advise the government and NGOs is restricted
to those few willing to endure the country’s hardships. U.S. agency
personnel stay only a short time and therefore institutional
48 (...continued)
Times, February 2, 2006; “Sabotage Cuts Power to More Than 100 Electrical Lines,” New
York Times, June 11, 2004.
49 SIGIR, Report to Congress, January 30, 2007, p.154-55; Howard Krongard, State
Department IG, testimony to House Government Reform Committee, October 18, 2005;
State Department, 2207 Report to Congress, July 2005; SIGIR, Report to Congress, January
30, 2005; July 30, 2005, October 30, 2005, January 30, 2006; James Kunder, USAID,
testimony to House Foreign Operations Subcommittee, September 7, 2005; “Security Costs
Slow Iraq Reconstruction,” Washington Post, July 29, 2005; “Thanks to Guards, Iraq Oil
Pipeline is Up and Running, On and Off,” New York Times, September 3, 2005.
50 Ambassador Jeffrey, Testimony to House Foreign Operations Appropriations
Subcommittee, September 7, 2005.
51 “Wolfowitz Says Iraq Violence Impedes Rebuilding Aid,” Wall Street Journal, June 1,
2005; “Driven from Iraq, Aid Groups Reflect on Work Half Begun,” New York Times,
November 15, 2004; “Security Conditions Continue to Hamper U.N. in Iraq,” Washington
File, August 11, 2004; “Charities Get Ready to Leave,” London Times, September 9, 2004.

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CRS-26
knowledge is not maintained. Iraqi experts necessary to successful
reconstruction have left — ten percent of registered doctors have
reportedly given up work in the past year. According to the U.N., in
May 2006, 22 doctors, nurses, and non-medical staff were killed and
50 were wounded. In 2006, more than 300 teachers and Ministry of
Education staff have been killed.52
! In a broader sense, prolonged insecurity has undermined the trust of
the Iraqi people in U.S. and now Iraqi government leadership to
bring about a democratic and economic transformation in Iraq,
opening the door to further political discontent and possible civil
war.53
There are two elements in the effort to provide the security that might allow
political and economic reconstruction to take hold — U.S. and coalition
peacekeeping forces and the training of Iraqi security forces to replace them. The
number of U.S. troops is roughly 145,500. There are also about 13,172 troops from
25 other nations.54 Although NATO rejected the Administration request that it
provide forces, it did agree to help train Iraqi troops, and all NATO members
currently provide training or equipment.55
About 43 percent of total U.S. appropriations for reconstruction — roughly
$15.4 billion — are aimed at building Iraqi security forces. According to the State
Department, in early April 2007, there were 135,000 trained and equipped
conventional Iraqi police and 135,700 army forces.56 In all, about 331,000 security
forces are currently defined by officials as ready for action. However, reports by
officials and observers have suggested that many fewer could be said to be capable
of the most demanding jobs. During the past three years, poorly trained and equipped
security forces, no-shows and desertions, dismissals of police for criminal behavior,
bribe-taking for obtaining higher rank or for release of insurgent suspects, and
52 SIGIR Report to Congress, July 30, 2006, p. 66; “Civilian Death Toll Reaches New High
in Iraq, U.N. Says,” New York Times, November 23, 2006; “As Death Stalks Iraq, Middle-
Class Exodus Begins,” New York Times, May 19, 2006; “Iraq’s Attorneys Practicing in a
State of Fear, Washington Post, June 10, 2006; “Professionals Fleeing Iraq as Violence,
Threats Persist,” Washington Post, January 23, 2006; “Facing Chaos, Iraqi Doctors are
Quitting,” New York Times, May 30, 2005; SIGIR, Report to Congress, July 30, 2005, p.
20; “World Bank Considers Sending Staff Back to Baghdad,” Washington Post, September
18, 2005.
53 “In Jaded, Perilous Capital, A Collision of Perceptions,” Washington Post, July 29, 2005;
“As Violence Deepens, So Does Pessimism,” Washington Post, May 18, 2004; “Fueling
Anger in Iraq,” Washington Post, December 9, 2003; “The Best, Brightest, and Wealthiest
Flee Iraq,” Chicago Tribune, November 21, 2004.
54 Iraq Index, Brookings Institution, [http://www.brookings.edu/iraqindex], April 5, 2007,
page 21; Department of State, Iraq Weekly Status Report, April 4, 2007.
55 “NATO Reports All 26 Nations are Aiding Iraq with Training, New York Times,
September 22, 2005.
56 “Inspector General Warns Logistics Plan for Iraqi Army in Jeopardy,” Inside the Army,
November 6, 2006; Department of State, Iraq Weekly StatusReport, February 14, 2007.

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CRS-27
infiltration of police and other units by sectarian militia groups have threatened U.S.
plans to increase security using Iraqi personnel.57
Early U.S. efforts to support forces specifically intended to protect critical oil
and electricity infrastructure are regarded by the SIGIR as failures. Currently,
assistance is being used to strengthen a different entity, the Strategic Infrastructure
Battalions (SIBs), Ministry of Defense forces which protect oil fields and pipelines.
Of seventeen SIBs (probably about 6,400 personnel), eleven are being trained by the
United States. Only one was considered capable of planning and executing
independent operations as of August 2006. The SIGIR most recently pointed out that
the SIBs, although growing in size and improving in capabilities, were unable to stop
the October 2006 attack on the power grid around Baghdad.58
Accountability, Waste, and Fraud
A lack of transparency in early contracting and numerous reports in the media
suggesting that reconstruction funds were being squandered led to the establishment
in the FY2004 supplemental of an Inspector General for the CPA, now called the
Special Inspector General for Iraq Reconstruction (SIGIR). To date, the SIGIR has
issued more than 82 audits and 80 project assessments, and it has conducted 96
limited onsite inspections as well as dozens of investigations of possible criminal
activity.59
57 GAO, Stabilizing Iraq: Factors Impeding the Development of Capable Iraqi Security
Forces, GAO-07-612T, March 13, 2007; “U.S. Officers Detail Problems with Iraqi
Soldiers,” Washington Post, November 1, 2006; “In Baghdad, a Force Under the Militias’
Sway,” Washington Post, October 31, 2006; “Flaws Cited in Effort to Train Iraqi Forces,”
Washington Post, November 21, 2006; “On Baghdad Streets, A Police Partnership Falters,”
New York Times, October 22, 2006; “Searching for the Exit,” New York Times, October 25,
2006; “Iraqi Soldiers Refuse to Go to Baghdad, Defying Order,” New York Times, August
29, 2006; “An Army of Some,” New York Times Magazine, August 20, 2006; “On Patrol,
Iraqis Prove Eager, Erratic and Green,” New York Times, August 10, 2006; “Misjudgments
Marred U.S. Plans for Iraqi Police,” New York Times, May 21, 2006; “How Iraq Police
Reform Became Casualty of War,” New York Times, May 22, 2006; “In Iraqi Town,
Trainees are Also Suspects,” Washington Post, April 29, 2006; “Iraqis Readiness Disputed
in Hearing,” Washington Post, January 20, 2005; “Iraqi Battalion Refuses to ‘Fight Iraqis’,”
Washington Post, April 11, 2004; “U.S. Needs More Time to Train and Equip Iraqis,” New
York Times, May 24, 2004; “U.S. Says Police in Iraq Need Bolstering,” Washington Post,
November 25, 2004; U.S. Officials Say Iraq’s Forces Founder Under Rebel Assaults,” New
York Times, November 30, 2004.
58 SIGIR, Review of Task Force Shield Programs, Audit 06-009, April 2006; SIGIR Report
to Congress, April 30, 2006, p. 28, October 30, 2006, p. 75; DOD, Measuring Stability and
Security in Iraq, August 2006, p 53.
59 See SIGIR website [http://www.sigir.mil/] for audit reports to date. SIGIR, Report to
Congress, January 30, 2007, Section 3.

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Some of the most egregious examples of misconduct appear to center on the
CPA’s use of Iraqi funds (see the DFI section below).60 Other notable cases involve
use of IRRF funds blended with Iraqi or DOD funds. A KBR contract to repair oil
fields and import gasoline and other oil products into Iraq (Restore Iraqi Oil, or RIO),
funded by about $900 million in U.S. funds, both DOD and IRRF, and $1.5 billion
in Iraqi money, led to findings by Defense Contract Audit Agency auditors disputing
$263 million in charges. Either the charges were inflated — KBR paid a Kuwait
company 40% more for gasoline than the U.S. military pays — or they were
unsupported by documentation. In the end, the Army, citing the wartime conditions
under which KBR operated, decided to ignore its auditors and pay KBR all but $10.1
million of the disputed charges, a percentage reportedly considered unusually low in
such cases.61
In November 2006, an audit of the same program conducted by the International
Advisory Monitoring Board (IAMB), which monitors the use of Iraqi funds, agreed
that the Army was justified in reimbursing KBR but also found that the excessive
cost of the program was in large part due to the cost of fuel delivery, accounting for
as much as 86 percent of the total cost. In one $871 million work order, for example,
only $112 million was attributable to the cost of fuel; the rest was for the fleet of
tanker trucks which transported it to Iraq from Kuwait. Payment was made for the
trucks even when, due to a lack of armed escorts, they sat idle. Rather than an
indictment of KBR, the IAMB audit suggests Army mismanagement of the
program.62
On March 9, 2006, Custer Battles, a contractor on the project that distributed the
new Iraqi currency, was found guilty of fraud. Although the contract let by the CPA
was for roughly $20 million, the judge controversially ruled that Custer Battles could
only be charged for fraud relating to the $3 million which was U.S. taxpayer money
— the rest were Iraqi funds and not under U.S. jurisdiction. The contractor received
60 At an October 18, 2005 congressional hearing (House Government Reform Committee),
the DOD IG revealed that all DOD IG office personnel had been withdrawn from Iraq in the
previous year; the Army Audit Agency, however, does have auditors in Iraq and is following
the KBR LOGCAP contract. For a summary of the Halliburton issues, see Joint Report of
the House Committee on Government Reform Minority Staff and Senate Democratic Policy
Committee, Halliburton’s Questioned and Unsupported Costs in Iraq Exceed $1.4 Billion,
June 27, 2005.
61 “Army to Pay Halliburton Unit Most Costs Disputed by Audit, New York Times, February
27, 2006; “Now You See It: An Audit of KBR,” New York Times, March 20, 2005; Defense
Contract Audit Agency, Audit Report 3311, October 8, 2004, available at Government
Reform Committee minority website [http://www.democrats.reform.house.gov]. In
December 2005, the IAMB called on the United States to “seek resolution” with the Iraqi
government — possibly make repayment — on up to $208 million of the Iraqi funds that
went to KBR for work questioned by the DCAA. “U.S. Owes $208 Million to Iraq, U.N.
Audit Finds,” Washington Post, November 6, 2005.
62 Crowe Chizek and Company, Updated Report of Agreed-Upon Procedures Regarding the
Settlement Between USACE and KBR, November 16, 2006; “Cost of Taking Fuel to Iraq is
Questioned in New Audit, New York Times, November 7, 2006.

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CRS-29
a $10 million fine.63 On August 18, a federal judge overturned the verdict and fine
on the disputed grounds that the CPA was not an entity of the U.S. government, but
rather an internationally-run body.64
Apart from possible criminal activity, there have been many questions raised
regarding evidence of poor project implementation and the quality of management
and oversight of these projects, the majority of these the responsibility of the Army
Corps of Engineers which runs the Embassy Project and Contracting Office. SIGIR
auditors and project assessment teams with engineering, audit, and investigative
experience have traveled to major U.S.-funded IRRF project sites to see if work is
being performed properly. Although most conclude that projects were either carried
out as intended or point out correctable quality control and structural deficiencies, the
SIGIR has found some projects to be especially problematic, including the following:
! The Basrah Children’s Hospital, expected to cost $50 million, will
run to at least $98 million and nearly a year behind schedule.
Bechtel, the project contractor, has been removed and the project
will be completed using local contractors. USAID, the agency
responsible, failed to report the cost and delays, in part because it
had only one contracting officer and one technical officer to oversee
20 projects worth $1.4 billion.65
! The Baghdad Police College, a $75 million construction project
implemented by Parsons, is riddled with deficiencies, including
improperly fabricated wastewater plumbing which poses a health
and structural hazard.66 The Mosul police headquarters, constructed
by an Iraqi contractor at a cost of nearly $1 million, is similarly
troubled.67
! A $218 million first responders network is ineffective —
communication is not possible between the three established zones
of the system and Iraqi citizens cannot call in to request emergency
assistance, among other problems.68
! After the expenditure of $186 million, only 6 of 150 planned
primary health care centers to be constructed by Parsons were
completed and only 14 more were expected to be finished. A
63 “Contractor Bilked U.S. on Iraq Work,” Washington Post, March 10, 2006.
64 “Verdict Against Iraq Contractor Overturned,” Washington Post, August 19, 2006.
65 SIGIR, Audit 06-026, July 2006; “U.S. Neglect Found in Long-Delayed Iraq Hospital
Project,” Washington Post, July 29, 2006.
66 SIGIR, Project Assessment-06-078.1 and 06-079.1, September 27, 2006; “Heralded Iraq
Police Academy a ‘Disaster’, Washington Post, September 28, 2006.
67 “U.S. Agency Cites Flaws in Another Iraqi Construction Project,” New York Times,
October 12, 2006.
68 SIGIR, Audit 06-020, July 2006.

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CRS-30
contract was awarded to Iraqi firms to complete 121 partially
constructed centers.69
! An October 2005 assessment of five electrical substations was
positive for the substations themselves, but found that installation of
distribution lines to the end users, part of the original plan, had to be
eliminated (presumably due to funding reallocations) and, therefore,
the benefits of the new substations would not be derived until the
Ministry of Electricity could perform the work. All five substations
were connected to transmission lines by end November 2006,
although they were operating at 36% capacity pending connection to
upstream substations.70
! A project to run 16 oil pipelines under the Tigris River failed amidst
warnings from a geologist that the subsoil was not conducive to
drilling, demonstrating a lack of appropriate oversight by the Army
Corps of Engineers. Nearly $76 million in DFI funds were wasted.71
! An examination of Task Force Shield, a program to train and
manage an oil and electricity infrastructure protection force, found
it had been unsuccessful after the expenditure of $147 million. In
part, this outcome was due to the absence of a clear management
structure for the various U.S. agencies involved. Further, auditors,
reportedly, could not determine how many Iraqis were trained or
how many weapons were purchase.72
! An audit of “design-build” contracts that characterize many of the
infrastructure projects found very high administrative costs in some
cases. About 55% of KBR work on the RIO project and 43% of a
Parsons oil project were consumed by overhead costs. Security is
likely one factor in the high level of overhead found here, and
enforced idleness while awaiting government direction to begin
work is another. However, the audit also found inadequate
accounting and billing systems to capture administrative costs in
four of five contracts examined.73
69 SIGIR, Audit 06-011, April 2006; SIGIR, Report to Congress, October 30, 2006, p. 78;
“In a Dispute, Army Cancels Rebuilding Contract in Iraq,” New York Times, May 13, 2006.
70 SIGIR, Project Assessments PA-05-05 to 09, in Report to Congress, October 30, 2005,
p. 53; SIGIR, Report to Congress, January 20, 2007, p. 195-198.
71 SIGIR, Project Assessment SA-2005-001, in Report to Congress, January 30, 2006, p. 73-
75; “Rebuilding of Iraqi Oil Pipeline as Disaster Waiting to Happen,” New York Times,
April 25, 2006.
72 SIGIR, Audit 06-009, April 2006; “In Shadows, Armed Groups Propel Iraq Toward
Chaos,” New York Times, May 24, 2006.
73 SIGIR, Audit 06-028, October 2006; “Idle Contractors Add Millions to Iraq Rebuilding,”
New York Times, October 25, 2006.

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! Roughly 370,000 weapons purchased with $133 million in IRRF
funds for the use of Iraqi security forces were not accompanied by
spare parts or technical repair manuals, and were not registered to
insure accountability. (Some of these weapons have reportedly
made their way to the black market.)74
! A DynCorp project to provide services to international police
trainers spent nearly $44 million on a residential camp that was not
used (including an Olympic-size swimming pool that was
unauthorized) and about $36 million for weapons that cannot be
accounted for. The audit found the State Department Bureau for
International Narcotics and Law Enforcement and State Office of
Acquisition Management provided poor contract administration.75
The Development Fund for Iraq (DFI). Many questions have been raised
regarding the CPA’s use and monitoring of DFI funds. Although the funds were
derived from Iraqi, mostly oil, resources, under Security Council Resolution 1483
(May 2003) the CPA had complete control over them during the occupation and
responsibility under international law to insure they were used appropriately. To
prioritize and recommend how DFI resources were used, the CPA established a
Program Review Board in June 2003. Although composed of coalition, multilateral
bank, and U.N. officials, the multilateral bank members had no vote and the U.N.
official served only as an observer. The Program Review Board published brief
minutes of its meetings but little detail regarding the nearly 2,000 contracts it
awarded utilizing Iraqi funds. Reportedly, U.S. contractors received as much as $1.9
billion of DFI funds, of which Halliburton subsidiary Kellogg, Brown & Root (KBR)
was awarded $1.7 billion (mostly the RIO project noted above).76
Security Council Resolution 1483 required that an international advisory board
to monitor the sale and use of oil be established, but at first the CPA opposed
international institution efforts to create a system of “special audits” that would allow
the board to look at any issue. CPA failure to establish the board led to international
criticism, and Security Council Resolution 1511 (October 2003) recommended that
the board be established as a priority and that the DFI should be “used in a
transparent manner.”77 Soon after, the CPA announced that it would allow the
advisory board to go forward and the first meeting of the International Advisory and
Monitoring Board (IAMB) was held on December 5, 2003. However, a delay in
appointing accountants by the CPA continued to prevent work up to early February
2004. In March 2004, the IAMB recommended installation of a metering system for
74 SIGIR, Audit 06-033, October 2006. “Black-Market Weapon Prices Surge in Iraq Chaos,”
New York Times, December 10, 2006.
75 SIGIR, Audit 06-029, January 2007.
76 “$1.9 Billion of Iraq’s Money Goes to U.S. Contractors,” Washington Post, August 4,
2004.
77 Security Council Resolution 1511, October 16, 2003, para. 23. “Oil to Come Under Iraqi
Control as U.S. Fails to Form Advisory Board,” Financial Times, August 19, 2003; “Annan
Deals a Blow to U.S. Draft Resolution,” Financial Times, October 3, 2003.

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oil extraction to prevent diversion (still not implemented), and criticized the use of
non-competitive bidding for contracts funded by the DFI.78
In its June 2004 audit, KPMG, the accounting firm designated by the IAMB to
audit the DFI, noted the CPA’s inadequate accounting systems and records and lack
of controls over ministry spending of DFI resources, opening the door for corruption.
KPMG also pointed out the use of non-competitive bidding for some contracts
funded by the DFI. Subsequent audits highlighted multiple financial irregularities.79
A representative on the IAMB accused the Administration of withholding
information on non-competitive contracts, and repeated requests to U.S. agencies for
information on sole-sourced contracts funded by the DFI were not answered.80 The
organization Christian Aid accused the CPA of being “in flagrant breach of the U.N.
resolution” giving it use of DFI funds. “Last minute” spending by the CPA of $2.5
billion in DFI resources in the weeks prior to the turn-over of sovereignty also drew
critical attention. Among other things, the spending went for equipment for security
forces, vocational training, and oil and electric infrastructure, and local projects.
Iraqi officials, too, were critical of the contrast between the slow spending of U.S.
funds and the rapid draw-down of the DFI.81
A January 2005 audit by the SIGIR seems to have confirmed the IAMB
accusations with a finding that the CPA “provided less than adequate controls” for
$8.8 billion of DFI resources it moved through Iraqi ministries.82 An April 2005
SIGIR audit concluded that CPA managers of DFI funds distributed in the South-
Central region of Iraq could not account for more than $96.6 million in cash and
receipts. An October 2005 audit found that South-Central personnel could not
account for more than $20.5 million in Rapid Regional Response Program funds and
made $2.6 million in excessive payments. In late 2005, several U.S. citizens were
78 The IAMB’s mandate was extended to December 31, 2007, under U.N. Security Council
Resolution 1723. The IAMB website is at [http://www.iamb.info/]; IAMB, Press Release,
March 24, 2004; “Monitoring Panel for Iraq Spending Yet to Start Work,” Financial Times,
February 5, 2004.
79 KPMG Audit dated June 29, 2004, available online at IAMB website
[http://www.iamb.info/]; Iraq Revenue Watch, Disorder, Negligence and Mismanagement:
How the CPA Handled Iraq Reconstruction Funds, Report no. 7, September 2004; Iraq
Revenue Watch, Audit Finds More Irregularities and Mismanagement of Iraq’s Resources,
December 2004; “Big Spender,” Financial Times, December 10, 2004.
80 Press Release, “Statement by the International Advisory and Monitoring Board on Iraq,”
September 8, 2004; “U.S. Won’t Turn Over Data for Iraq Audits,” Washington Post, July
16, 2004.
81 Christian Aid, Fuelling Suspicion: the Coalition and Iraq’s Oil Billions, June 2004; “U.S.
Is Quietly Spending $2.5 Billion from Iraqi Oil Revenue to Pay for Iraqi Projects,” New
York Times, June 21, 2004.
82 According to IG Bowen, the Iraq Commission on Public Integrity is investigating $1.5
billion that may have gone missing in the Ministry of Defense. “Special Inspector General
Stuart Bowen,” Washington Post, November 9, 2005.

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criminally charged with respect to the handling of these funds — and have since pled
guilty. In February 2007, five more were indicted.83
In early 2006, it was reported that an examination by the Army Joint Contracting
Command of 9,000 contracts supported by about $5.8 billion in Iraqi money has
shown a number of problems, including contracted projects that were not carried out
and a lack of supporting documents. As a result, roughly $230 million that was
withheld to finance the contracts reportedly will be returned to the Iraqi government
for use on reconstruction projects.84
Assessments of Reconstruction
There have been dozens of reports and articles during the past three years that
have sought to analyze, criticize, and recommend action regarding the progress of
reconstruction aid.85 Many focus on the history of the aid program with a view
toward explaining the current state of affairs. Others, like the Iraq Study Group
report (see below), seek to improve future outcomes. See the appendix for a
collection of many such criticisms.
83 Among other things, the SIGIR found a $500,000 contract in Karbala that was not carried
out, a $1 million grant for training librarians that was not delivered, and a half constructed
$7.3 million police academy. “Guilty Plea in Iraq Bid-Rigging,” Washington Post, February
2, 2006; “U.S. Accuses Pair of Rigging Iraq Contracts,” Washington Post, November 18,
2005; “2nd Army Officer Charged in Iraq Rebuilding Scandal,” New York Times, December
16, 2005; Management of Rapid Regional Response Program Grants in South-Central Iraq,
Report No. 05-015, October 25, 2005; Audit of Oversight of Funds Provided to Iraqi
Ministries through the National Budget Process, Report No. 05-004, January 30, 2005; and
Control of Cash Provided to South-Central Iraq, Audit Report No. 05-006, April 30, 2005,
available at SIGIR website [http://www.sigir.mil]; “5 Indicted in Probe of Iraq Deals,”
Washington Post, February 8, 2007.
84 “Auditors Find Widespread Waste and Unfinished Work in Iraqi Rebuilding Contracts,”
New York Times, January 31, 2006.
85 Among the most incisive are Anthony Cordesman, Cleaning Up the Mess, Center for
Strategic and International Studies, July 7, 2004; David Rieff, “Blueprint for a Mess,” New
York Times Magazine, November 2, 2003; George Packer, “War After War: Letter from
Baghdad,” The New Yorker, November 24, 2003; Kenneth M. Pollack, “After Saddam:
Assessing the Reconstruction of Iraq,” Foreign Affairs, January/February 2004; John Hamre
and others, Iraq’s Post-Conflict Reconstruction: A Field Review and Recommendations,
Center for Strategic and International Studies, July 17, 2003; James Fallows, “Blind into
Baghdad,” The Atlantic Monthly, January/February 2004; Center for Strategic and
International Studies, Post-Conflict Reconstruction Project, Frederick Barton and Bathsheba
Crocker, Co-Directors, Progress or Peril? Measuring Iraq’s Reconstruction, September
2004 and November 12 Update; Larry Diamond, Squandered Victory: The American
Occupation and the Bungled Effort to Bring Democracy to Iraq, Henry Holt, 2005; James
Fallows, “Why Iraq Has no Army,” The Atlantic Monthly, December 2005; Rajiv
Chandrasekaran, Imperial Life in the Emerald City: Inside Iraq’s Green Zone, Knopf, 2006;
and George Packer, The Assassins’ Gate: America in Iraq, Farrar, Straus and Giroux, 2005;
International Crisis Group, Reconstructing Iraq, September 2, 2004, available at
[http://www.crisisgroup.org/home/index.cfm?]; T. Christian Miller, Blood Money, Little,
Brown, and Company, 2006, and SIGIR, Iraq Reconstruction: Lessons in Program and
Project Management, March 2007.

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Another category of assessments are reviews of specific projects, some findings
of which are noted in the previous section. Security concerns in Iraq have made
difficult the kind of expert and anecdotal reports usually produced in other places by
interest groups and the news media. Most project assessments, therefore, have come
from the various government auditors.86 Even these, however, appear constrained by
security in the number of site-visits they are able to undertake to review project
results. The SIGIR is conducting some of its assessments by aerial imagery because
of the risk to its personnel. Government Accountability Office (GAO) investigators
were not even able to visit Iraq while preparing a 2005 report on water and sanitation
programs.87
An exception to the dearth of private sector accounts of specific project work
is a February 2006 report by a professional from the Institute of Electrical and
Electronics Engineers who appears to have been given unusual access to power
plants and officials in the electric power sector. In brief, the author highlights
reasons for the long-reported failure of assistance to bring electric power at least up
to pre-war standards. Among these are the specific targeting of electrical
infrastructure by insurgents, the lack of maintenance skills by Ministry of Electricity
workers, and management and personnel problems in the Iraqi government, made
worse by the presence of thousands of fictitious employees drawing paychecks. Less
well known reasons are the low levels of revenue flowing to the Ministry due to
limited use of electric metering and a low rate structure. U.S.-funded construction
is also directly faulted for poor planning, including a mismatch between the generator
technologies provided to Iraq and the fuel available to it. In one case, the best fuel
for the generators — natural gas — was being burned off at an oil field just across
the street from the power plant, and no effort had been made to capture it for use. The
assessment is a reminder that the provision of equipment alone is insufficient —
multiple factors must be addressed to bring significant improvements.88
Some observers have suggested that one problem with assessing the progress
of reconstruction is that there is no “big picture” overview. Responsible government
agencies provide information regarding how many infrastructure projects are being
started and completed, how many small-scale grants are being provided, and how
many people are being trained, but there is little detail regarding to what degree the
overall national need for drinking water, schools, health care, electricity, and other
requirements is being met by the billions of dollars in U.S. resources — not to
mention Iraqi and other donor resources — targeted at these needs. When such data
86 For a list of audits and inspections from all agencies, see SIGIR, Report to Congress,
January 30, 2007, Appendices I, J, K, L.
87 SIGIR, Report to Congress, July 30, 2005, p. 60-66. For an assessment of several aspects
of reconstruction, see GAO, Rebuilding Iraq: Status of Funding and Reconstruction Efforts,
GAO-05-876, July 2005. Also, GAO, Rebuilding Iraq: U.S. Water and Sanitation Efforts
Need Improved Measures for Assessing Impact and Sustained Resources for Maintaining
Facilities, GAO-05-872, September 2005.
88 Glenn Zorpette, “Re-engineering Iraq,” IEEE Spectrum, February 2006, available at
[http://www.spectrum.ieee.org/feb06/2831].

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has been gathered, mostly by the SIGIR, it suggests that the needs are much larger
than donor or other resources currently being made available.89
The Iraq Study Group Recommendations and Other Proposals. As
the Administration, Congress, and the foreign policy community re-think options for
U.S. military and diplomatic action in Iraq, some are considering new approaches to
the reconstruction effort. In November 2006, the Iraq Study Group published its
report. In addition to giving the highest priority to the rapid training and equipping
of Iraqi security forces, the Group includes several recommendations regarding
economic reconstruction assistance. The Group proposes an increase in economic,
as distinguished from security, assistance to $5 billion a year (Recommendation 64).
By comparison, in the first three years of the war, assistance averaged $5 billion per
year, but roughly $2.4 billion in economic aid, including the CERP, was provided in
FY2006. The Group suggested that new funds emphasize capacity building and job
creation efforts.
The Study Group also proposes that more should be done to bring international
donors into active participation in reconstruction (Recommendation 65). Further, the
United States should take the lead in funding the U.N. High Commission for
Refugees and other humanitarian activities in Iraq (Recommendation 66). Authority
should be provided to merge U.S. funds with those of international donors and Iraqi
participants in order to encourage partnerships with them (Recommendation 71).
A number of the Group proposals reflect dissatisfaction with the way in which
U.S. assistance is administered. The Group believes that no one individual is
responsible for the program and, therefore, suggests that the President create a Senior
Advisor for Economic Reconstruction in Iraq to act as the principle contact on this
issue (Recommendation 67). They also suggest that the U.S. Ambassador to Iraq
have available to him a CERP-like quick-disbursing fund and that he be given
authority to rescind funding from programs where the Iraqi government is not an
effective partner (Recommendation 68).
Further recommendations that touch on assistance activities include that the
Department of Justice, rather than DOD, should take the lead in reforming the
Ministry of the Interior (60), that technical assistance in administration and financial
management should be provided the Ministry of Oil (86), and that security assistance
be made more flexible to allow for better inter-agency (i.e., State-DOD) cooperation
(70). A recommendation (69) that the SIGIR’s authority be continued has largely
been met.
Recently, other suggestions have been offered regarding the reconstruction
program. Retired Army General Barry McCaffrey has proposed that $10 billion a
year over five years be provided in economic aid. It is reported that the U.S. Army
89 Further, “measurements” provided by the Administration have been criticized as highly
selective. See Measuring Stability and Security in Iraq, Report to Congress in accordance
with DOD Appropriations Act 2006, May 2006; and Anthony H. Cordesman, The Quarterly
Report on “Measuring Stability and Security in Iraq”: Fact, Fallacy, and an Overall Grade
of “F”, Center for Strategic and International Studies, June 5, 2006.

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is pushing for a significant program to employ Iraqis in Baghdad, including an
increase in reconstruction projects in parts of the city secured by U.S. and Iraqi
troops. And, just prior to his resignation, Secretary Rumsfeld proposed in a memo
that reconstruction aid only be provided to areas of the country where there is no
violence.90
90 Barry R. McCaffrey, “Beyond Baker-Hamilton”, Washington Post, December 13, 2006;
“Iraq Army Plans for a Wider Role,” New York Times, December 13, 2006; “Rumsfeld
Called for Change in War Plan,” Washington Post, December 3, 2006.

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Appendix: Criticisms of Iraq Reconstruction
Included among the many suggestions of what has gone wrong in the Iraq
reconstruction effort from a wide range of sources are the following:
! Inadequate security. As noted earlier in this report, lack of a
secure environment in which to undertake reconstruction meant
delays in project implementation and completion; destruction of
completed projects; greatly increased costs which, in turn, drained
funding from other projects; and a loss of foreign expertise and local
participation that would have made projects more effective. Among
the reasons were a failure to anticipate post-invasion security needs
and the early decision of the CPA administrator to disband the Iraqi
military. Initially, security forces received hurried and insufficient
training.
! No prior planning. Planning for post-Iraq reconstruction was inept.
Military officials planned for a humanitarian crisis that never
happened. Moreover, accounts suggest that efforts to plan for
reconstruction were actively discouraged by the Pentagon leadership
lest it raise potential obstacles to U.S. invasion. The State
Department’s 2002 Future of Iraq Project, which utilized dozens of
Iraqi experts to anticipate post-war concerns, including the
possibility of widespread looting, was studiously ignored by DOD.
! Mismanaged transition to Iraqi governance. Many critics have
pointed to the slow pace of forming a publically approved Iraqi
authority which could have provided Iraqis with a sense of
ownership in the reconstruction and democratic process and
discouraged disorder. In the first six months, foreign aid workers
had no counterpart in the Iraqi ministries able to make decisions that
might advance reconstruction. CPA-imposed de-Baathification
disrupted the functioning of the Iraqi bureaucracy. Further, large-
scale reconstruction efforts were designed with little regard for Iraqi
views and were originally meant to be implemented by U.S.
contractors with Iraqis playing a secondary role.
! Discouraging a U.N. and International Role. The Administration
sought at first to keep control of post-war reconstruction in U.S.
hands, rather than internationalizing it as had been done in Kosovo
and Bosnia. Critics asserted that, had the U.N. been in a position of
greater responsibility, it would have deflected Iraqi criticism of the
United States, legitimized occupation policies, and encouraged
financial and peacekeeping participation by bilateral donors. Donors
were unresponsive to U.S. pleas for either military or financial
assistance, partly because they were not being offered a “seat at the
table” in determining the future of Iraq. The decision to exclude
some countries from competing for Iraq contracts, in the view of
many, further alienated potential international support.

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! Inadequate U.S. civilian administration. Early on, a British
official was quoted as saying of the CPA, “this is the single most
chaotic organization I have ever worked for.”91 The CPA was
understaffed, lacking experience and knowledge of the country, in
many cases with no background in assistance programs, and too
isolated from the Iraqi people (with headquarters in a former palace
and requiring a military bodyguard when they ventured outside).
The level of aid expertise improved under State Department
management, but security concerns continued to limit contact with
Iraqis and insufficient staff numbers negatively affected project
oversight as well as PRT implementation.
! Excessive Reliance on the U.S. Military. Although actual
reconstruction is inherently a civilian effort, in Iraq much of it was
implemented by military personnel. In January 2003, the President
placed sole authority for reconstruction in the hands of DOD, rather
than with development assistance or democracy experts at USAID
and State. In June 2004, after the State Department was given the
lead role, the Army continued to manage about $10 billion in
infrastructure projects, insuring a continued lack of coordination
between assistance entities. Utilizing the CERP program, military
civil affairs teams continue to influence reconstruction at the
grassroots level. Some assert that these are roles for which the
military had not been prepared — there is a long learning curve and
many mistakes were made — and which emphasize to the Iraqi
people the “occupation” character of the U.S. presence. Instead,
some critics suggested that a corps of civilian reconstruction
specialists should have been deployed around the country. As early
as July 2003, the Hamre Assessment Mission report recommended
that 18 provincial CPA offices be established with 20-30 civilian
staff in each.92 It was not until mid-2005, that the PRT program was
launched. Its spread was delayed by military reluctance to provide
security.
! Poor Accountability. As discussed earlier in this report, a number
of projects were poorly implemented. In some cases, funds may
have been misused. What unites many of these accounts, perhaps
most notably the CPA’s cavalier treatment of billions in Iraqi-owned
funds, is that they could have been prevented by more thorough
oversight by government managers.
! Ineffective Assistance. Measurable objectives in critical sectors,
such as oil production and electric power generation, were not met.
91 “America’s Rebuilding of Iraq Is in Chaos, Say British,” London Daily Telegraph, June
17, 2003.
92 John Hamre, and others. Iraq’s Post-Conflict Reconstruction: A Field Review and
Recommendations, July 17, 2003, page 5.

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But the full picture of the effectiveness of the reconstruction effort
in most sectors is clouded by the impact of instability and conflict.
! Inadequate Levels of Assistance. The high cost of conducting
reconstruction projects in Iraq: due to protective security spending
and large overhead costs — amounting in some cases to half of
project totals — meant that amounts appropriated for economic
reconstruction did not produce the equivalent in goods and services
that one would expect in other aid recipient countries. In short, less
bang for the buck. Further, funds originally intended for economic
reconstruction, particularly water and electricity programs, were
diverted to training of Iraqi security forces.
! Too Broadly Dispersed Assistance. The aid effort attempted to do
too much in too many sectors from health to electricity to
microenterprise to roads. As a result, too few resources were
scattered over too many projects to produce a significant impact in
any one of them. Assistance should have been concentrated more
intensively in key areas such as oil production and governance so
that Iraqi funds could have been generated and Iraqi managers could
spend them.
! Poor Contracting and Procurement Processes. The SIGIR has
looked at contracting actions from before the war through the CPA
to the present. Among other problems, it points to the failure to
involve contracting and procurement personnel in the planning
stages of post-conflict reconstruction operations, the lack of
emphasis given contracting for smaller projects, the use of sole-
source and limited competition contracting, and the failure to give
a single unified contracting entity the authority to coordinate all
contracting activity.93
crsphpgw
93 SIGIR, Iraq Reconstruction: Lessons in Contracting and Procurement, July 2006.

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