US erred in Iraq rebuilding programme-US auditor

BAGHDAD, Sep 1 (Reuters) The US government should have been quicker to employ local firms to help rebuild Iraq instead of relying on US corporations whose contracts gave them no incentive to minimise costs, a US official said here.

The top US auditor for Iraqi reconstruction also said yesterday it was too early to say whether Iraqis would ''get value for money'' from the 22 billion dollar Washington is investing on rebuilding postwar Iraq. The programme has been beset by complaints of waste, fraud and corruption that his office is investigating.

Thirty per cent of the projects inspected by his office had not met the required standard and some were outright failures.

''The programme is obviously still in full swing, and to make a judgment about its success or failure at this point would be premature,'' Stuart Bowen, the Special Inspector General for Iraq Reconstruction, told journalists in Baghdad.

Of the 56 sample projects his office had inspected, 70 per cent had met ''contract expectations'', he said. ''Admittedly there have been some failures in that other 30 per cent, but the overwhelming majority indicate good work.'' Fraud and corruption were not common but ''waste is an issue'', he said, noting that six billion dollar, the biggest percentage of the fund, had been swallowed by the cost of protecting sites from insurgents.

''Poor security limits movement, which prevents contractors from getting the job done. It is a cost.'' He said the US government should have made less use of expensive US corporations. There has been a big shift in the past year towards giving most contracts to Iraqi firms, he added.

PAYING FOR EVERYTHING ''We used them because we did not know what the conditions would be in postwar Iraq. But we could have moved sooner away from design-build consortia, employing more Iraqi firms. That puts money where it should be, into the Iraqi economy.'' He said the US corporations had been given cost-plus contracts, under which the contractors are paid in full even if mistakes are made and the costs of the project go over budget.

''You pay for everything. Mistakes, everything. It is the cost of doing business,'' Bowen, a former White House lawyer on his 13th visit to Iraq, told Reuters.

Of the 22 billion dollar in the reconstruction fund, 15 billion dollar had now been spent, he said. A total of 21 billion dollar had been ''obligated'', or put under contract. The remaining money would be obligated by September 30, when all unused funds are due to revert to the US Treasury.

Bowen also said the United States needed to give more help to the Iraqi government in fighting corruption, which Iraqi graft inspectors estimate costs 4 billion dollar a year.

''More US financial and personnel support needs to be given to the anti-corruption effort,'' said Bowen, whose office was created by the US Congress in November 2003.

Reuters SRS VP0445