The $87 Billion Money Pit

U.S. officials protest, as always, that they're getting bad press. Natsios insists electricity regeneration is on schedule. "This is the fastest and most massive reconstruction effort that has been run by any government in the last 50 years," says Natsios, one of the most respected development specialists in Washington. "It's faster than the Marshall Plan." Yet even Sanchez conceded last week that his biggest concern was "the pace at which we are making progress: we need to accelerate it." In recent weeks the CPA and USAID have declared that contracts will be competitively bid now. And, stung by congressional criticism, CPA chief L. Paul Bremer and Natsios recently installed new accountability controls. Still, world bodies such as the United Nations want more transparency.

Will that mean the effort gets bogged down even further, stymied by turf fights and bean counters? NEWSWEEK's investigation indicates that there may be just as many problems ahead, raising serious questions about the vast amounts of money Bush has demanded for Iraq with little tolerance for debate.

Disorganization And Turf Battles

The Bush administration's favorite statistic from Iraq is the 1,595 schools it has just finished rehabilitating. This is, after all, the human face of occupation--freshly painted walls, American know-how and generosity, all wrapped up in smiling, adorable faces. And though that number is still less than a fifth of Iraq's 10,000 schools, it seems like amazingly fast work. The problem: many of the "rehabilitated" schools don't look ready for the morning bell. NEWSWEEK visited five schools in Baghdad's Camp Sara neighborhood, all of which were among those listed as rebuilt, all by different Iraqi contractors working for Bechtel. None had enough textbooks, desks or blackboards. Most had refuse everywhere, nonfunctioning toilets and desks made for two kids that were accommodating four. Even Ahmed Majid Jassim, a pro-U.S. headmaster who says that "Americans have made a great effort," comments, "I've seen rebuilt schools, and this isn't one of them."

It's not quite as bad as the suspiciously sandy U.S. concrete that caused schools in South Vietnam to collapse in the 1960s, generating support for the Viet Cong. But the good-will project is also not creating quite as much pro-American enthusiasm as the Bushies would like. What's the problem? A lack of accountability, it seems. One Iraqi construction engineer who worked on school projects says it's not that Iraqi firms are corrupt and incompetent. To meet the U.S. deadline for fast refurbishment, the occupation authority set a short time frame, then Bechtel hired contractors, who in turn hired subcontractors and even sub-subcontractors. But few U.S. officials seemed to follow up with oversight. As one USAID official admits, "Saddam had better accountability" in his economic affairs, as brutal as he was, than the CPA does. Bechtel proudly points out that 102 of its 140 USAID contracts were subbed to Iraqi firms. But many of these sub-subcontractors cut corners as they tried to meet Bechtel's very short deadline. "The original tender for our school called for air conditioners in every classroom," said an Iraqi engineer named Marwan. Once the subcontractor got it, it was an air cooler. "Once we got it, it was a ceiling fan for $11 apiece." At the Al Qaqa primary school, headmistress Haibat Abdul Hussein said the Iraqi contractor walked off the job shortly after starting, leaving the school a mess of construction debris and incomplete work. "I can't deal with this anymore; I don't even know what happened. All I know is they said the Americans told them to stop working," she said. She planned to organize a demonstration in front of the school in protest.

Similar confusion may have exacerbated the power crisis. As one USAID official describes it, it's "a chicken-and-egg problem." The power stations need natural gas and (to a lesser degree) oil to run, but the oil refineries and wells need power to operate. Still, there seems to have been less than full coordination between Bechtel, which is responsible for electricity, and Halliburton, which has an open-ended contract to secure fuel: Halliburton says it has not been asked to supply fuel for restarting the refineries. Disputes between U.N.- and U.S.-authorized companies also obstruct progress. At the key port of Umm Qasr, Bechtel and its subcontractors left in frustration when a Turkish company--previously contracted through the United Nations--suddenly appeared, claiming it had rights to the job. Though the port is operating, needed dredging and wreck salvage have been held up while the dispute is resolved.