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August 12th,
2007 - U.S. Pays Millions In Cost Overruns For Security in Iraq |
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U.S. Pays
Millions In Cost Overruns For Security in Iraq By Steve Fainaru Washington Post August 12, 2007 Baghdad - The U.S. military
has paid $548 million over the past three years to two British security firms
that protect the U.S. Army Corps of Engineers on reconstruction projects,
more than $200 million over the original budget, according to previously
undisclosed data that show how the cost of private security in Iraq has
mushroomed. The two companies, Aegis
Defence Services and Erinys Iraq, signed their original Defense Department
contracts in May 2004. By July of this year, the contracts supported a
private force that had grown to about 2,000 employees serving the Corps of
Engineers. The force is about the size of three military battalions. U.S. officials and company
representatives attributed the overruns to the cost of protecting a largely
civilian workforce amid an escalating insurgency, as Corps of Engineers
commanders demanded more manpower and increasingly expensive armor to guard
their field staff. "To pay a man or a
woman to come over here, put the vest on every day and escort military and
civilians around the theater, knowing that people want to blow them up and
kill them, you gotta pay to get that level of dedication," said Col.
Douglas P. Gorgoni, senior finance officer for the Corps of Engineers in
Iraq. Months ago, the military
recognized that the two overlapping contracts were costing millions of
dollars in duplicate spending and sought to consolidate them. The result is
still the single largest security contract in Iraq. The new contract will
save $7 million a month, according to the Corps of Engineers, but will still
be worth up to $475 million to the winning bidder. The Army eliminated Erinys
from the competition, but the company has held up the award by filing three
separate protests against what it described as a "fundamentally
flawed" procurement process. The protests have forced the military to
extend Erinys's contract. The company has received $169.4 million since the
beginning of that contract, $120 million more than originally budgeted. "Quite frankly, they
are very extensive, very lucrative contracts. Why would they not try to
protest them?" Gorgoni said, adding that he could not comment on the
merits of the protests. Aegis is a finalist for the new contract, according
to sources familiar with the bidding process. The private security
industry has surged in Iraq because of troop shortages and growing violence.
After the March 2003 invasion, hundreds of foreign and Iraqi companies, many
of them new, signed contracts with the U.S. and British militaries, the State
Department, the Iraqi government, media and humanitarian organizations and
other private companies. The size of this force and
its cost have never been documented. The Pentagon has said that about 20,000
security contractors operate in Iraq, although some estimates are
considerably higher. Private security contractors have been used in previous
wars, but not on this scale, according to military experts. Several lawmakers
have recently sought to regulate the private security industry and account
for billions of dollars spent on outsourcing military and intelligence tasks
that once were handled exclusively by the government. Rep. Marcy Kaptur (D-Ohio),
a member of the House Appropriations defense subcommittee who was briefed by
Aegis and the Corps of Engineers during a February visit to Iraq, said
lawmakers are only now realizing the scope of private security there.
"We're in the wake of this speedboat. We can't even catch up to the
contracts," said Kaptur, who opposes the use of private forces and
initiated an audit of Aegis by the Special Inspector General for Iraq
Reconstruction, the second the agency has conducted. The payments to Aegis and
Erinys "are immense and probably shocking to a lot of people, but they
represent just two companies within one sector," said Peter W. Singer, a
Brookings Institution senior fellow who wrote a book on private security and
has advocated greater oversight of the industry. "We're talking
tip-of-the-iceberg stuff here. That's pretty disturbing when you begin to
extrapolate it out." Company representatives said
the contracts were expanded to confront the escalating insurgent threat.
"We're fulfilling the need as directed by the client," said Kristi
M. Clemens, Aegis's Washington-based executive vice president. She said costs
rose in line with the Corps of Engineers' security demands, including a
request for additional armored vehicles that cost roughly $150,000 and are
manned by guards who earn $15,000 a month. "It's expensive to operate in
a high-risk area," Clemens said. The chairman of Erinys,
Jonathan Garratt, wrote in an e-mail that "the Army has increased the
volume of services in response to the security situation in Iraq" since
the company was awarded its contract. "Erinys has provided the increased
services as requested by the Army in properly-documented change orders,"
he wrote. Aegis and Erinys work
side-by-side in Baghdad's Green Zone. The Corps of Engineers is made up
primarily of civilians and does not have enough resources to provide its own
security, officials said. The military has said the use of private security
forces ultimately saves money and frees up troops for more urgent tasks, such
as fighting the insurgency. Aegis signed its original
contract in May 2004 with the Iraq Project and Contracting Office, a Defense
Department agency created to manage reconstruction projects. The initial
contract was for $92.3 million, according to Aegis and the Corps of
Engineers, and included options for two additional years that raised the
total to $293 million. Because of the additional workload and extensions, the
military has paid Aegis $378.5 million, or $85.5 million more than originally
budgeted. In October 2006, according
to the Corps of Engineers, the project office was folded into the Gulf Region
Division of the Corps of Engineers, which had an existing security contract
with Erinys also dating to May 2004. That contract was initially worth $15.2
million in the first year and included options for two additional years that
raised the total to nearly $49 million, according to Erinys. Through July,
the military had paid Erinys $169.4 million, or $120 million more than
originally budgeted. "The disbursements are
larger than the base contracts because over time the security mission
requirements expanded and the contract has spanned a total of three-plus
years," Gorgoni said. "Both contracts were correctly written in such
a manner to allow rapid expansion to meet the insurgent threat." The merger left the Corps of
Engineers with two private security firms. Erinys continues to provide
personal protection for several Corps officials involved in reconstruction.
Aegis runs security details for other Corps personnel and operates more than
a dozen reconstruction liaison teams, in which guards armed with assault
rifles assess rebuilding projects throughout the country. Aegis also operates
the Reconstruction Operations Center, an information hub in the Green Zone
that provides intelligence and tracks the movements of security details
across Iraq. Corps of Engineers officials
said both companies have been essential to the reconstruction effort.
"Without private security, our mission would be much more difficult and
would require coalition forces to be diverted from their assigned combat
missions," said Col. Robert Walton, who oversees security operations for
the Corps in Iraq. The military has paid more
than $150 million to both companies - $106.8 million to Aegis and $48.3
million to Erinys - since the merger, according to the Corps of Engineers.
Together, the contracts have a monthly "burn rate" of $18 million.
By consolidating, military planners have calculated, the cost could be
reduced to $11 million a month. "Right now, you have
two human resources offices, one for Aegis and one for Erinys. It's in the
government's best interests that we have one," Gorgoni said. "They
have two sets of logistics offices. Each has overhead and administration and
management. We're economizing that into one." The companies' mission is as
dangerous as it is expensive. According to the Labor Department, which
tallies contractor casualties based on insurance claims, at least 181 private
security contractors have died in Iraq since the beginning of the war. Aegis
has lost 16 employees in Iraq. Erinys has lost at least 10, according to
published accounts that were not disputed by the company. No Corps of
Engineers employees have been killed while under the protection of either
Aegis or Erinys, the companies said. The Aegis and Erinys
contracts were scheduled to expire last spring. Erinys filed its first
complaint in June after the Army determined that its bid for the new contract
failed to fall within the "competitive range." After a judge filed
a temporary restraining order to prevent the military from awarding the
contract, the military reappraised the bidding, including Erinys's proposal,
then eliminated the company again. Erinys filed another protest, which is
under review by the U.S. Court of Federal Claims. Garratt, the Erinys
chairman, wrote that the contract includes provisions allowing the military
to continue using Erinys as late as February 2008. "Accordingly, the
current bid protests are not in any way impacting the level of security
services that the Army is receiving," Garratt wrote. Gorgoni said that the delays
are preventing the military from realizing the projected savings under the
new contract. However, he said, the cost is insignificant when it comes to
saving lives. "I can tell you, the
last thing I think about when I'm taking indirect fire and a team is
protecting me is how much it costs," he said. "If you're on the
receiving end, no price is too high." Staff writer Alec Klein and
staff researcher Julie Tate in Washington contributed to this report. External link: http://www.washingtonpost.com/wp-dyn/content/article/2007/08/11/AR2007081101378.html |