False Claims Act Resource Center

Iraq Reconstruction Fraud

The federal government continues to spend billions of dollars on reconstruction and recovery efforts in Iraq. According to the October 2007 Semiannual Report from the Special Inspector General for Iraq Reconstruction, the United States has appropriated $45.429 billion for Iraq Reconstruction and has spent $26.983 billion of those funds.

The federal government has relied extensively on private contractors to undertake major reconstruction projects and provide support to U.S. troops. Reconstruction and support contracts are often cost-reimbursement-type contracts, that allow the contractor to be reimbursed for reasonable, allowable and allocable costs to the extent prescribed in the contracts. Further, these contracts often contain award fee provisions that are intended to incentivize more efficient and effective contractor performance.

This massive government spending has been plagued by repeated allegations of wide scale fraud and abuse. According to a July 2007 report from the Government Accountability Office, entitled “Rebuilding Iraq: Reconstruction Progress Hindered by Contracting, Security, and Capacity Challenged,” the Department of Defense contract management has been at high risk for the past 15 years because of its vulnerability to fraud, waste, abuse and mismanagement. The GOA Report also concluded that “there are a number of conditions that exist in Iraq that have led to, or will lead to, increased risk of fraud, waste and abuse of U.S. funds.”

The Defense Contract Audit Agency (“DCAA”) audit reports issued between February 2003 and February 2006 identified $2.1 billion in questioned costs and $1.4 billion in unsupported costs on Iraq contracts. For example, the GAO has reported that the Defense Contract Audit Agency questioned hundreds of millions of dollars in charges paid by the United States government to Kellogg Brown & Root under a contract to help rebuild Iraq’s oil infrastructure. The contract, a cost-plus-award-fee type contract, also was used to import fuel from neighboring countries to avoid domestic oil shortages in Iraq. The DCCA questioned whether the contractor overcharged the government hundreds of millions of dollars for the purchase and delivery of this fuel.

Other allegations of fraud in Iraq Reconstruction and Support Contracts include: double-billing for goods and services; inflating or overcharging for goods and services; charging for goods never delivered or services never performed; charging for goods or services that were inadequate, unsafe or failed to meet the contract specifications; and charges for services performed by untrained or unqualified contractors.

Exposing fraud, waste and abuse in Iraq Reconstruction and Support Contracts will continue to depend heavily on the courage of whistleblowers. Since most of the contracts are performed inside Iraq, away from the attention of public and media scrutiny. If you believe you have information related to a claim of Iraq Reconstruction and Support Fraud, and would like to speak with a member of our nationally recognized qui tam whistleblower practice group about a potential Federal False Claims Act case, click here.