Department of Defense Appropriations Act, 2004 - Continued

DEPARTMENT OF DEFENSE APPROPRIATIONS ACT, 2004—CONTINUED

AMENDMENT NO. 1300

    Mr. WYDEN. Mr. President, tonight the United States Senate accepted an amendment that I wrote with the distinguished senior Senator from West Virginia, Mr. Byrd, to require accountability and independent oversight on the "contracts for reconstruction and other services in Iraq that are funded in whole or in part with funds that are made available by the Department of Defense."

    This requirement is long overdue.

    Too much money is moving right now out of public coffers into private hands without adequate assurance that those hands have won the contracts fairly. Suffice it to say, the sums of money involved are staggering. The latest issue of Newsweek magazine says:

    $1 billion a week, and that's the lowside. So much for "self-sustaining" reconstruction.

    The head of Iraq's State oil marketing organization thinks "the United States is dreaming if it believes it will be able to finance the reconstruction with oil money alone."

    I was particularly troubled several weeks ago because, in the New York Times magazine, there was a feature length article describing the letting of a multibillion-dollar oil field contract to Kellogg, Brown and Root. That contract was sole source, meaning that Kellogg, Brown won it without having to compete at all. But now it appears that Kellogg, Brown and Root actually developed the Army's plan for the oil field restoration effort, and then was awarded the contract to carry out the plan, almost automatically.

    I think it is important to be clear. This process essentially allowed an incumbent contractor to identify the criteria for a multibillion-dollar contract and virtually ensured that it would be awarded the contract without competition. The inside track doesn't peter out there. Under the auspices of an even larger, incredibly lucrative contract with the Army, Kellogg, Brown seems to have written the Army's so-called contingency plan for rebuilding Iraq. If the news reports are correct, then the potential for sole-source custom-crafted contracts is practically guaranteed by Kellogg, Brown's agreement.

    The Department of Defense recently announced that it is going to go back and solicit bidding for the oil field contracts. So, in a sense, that ends the original controversy, the original contract that I was so concerned about with Kellogg, Brown and Root. But the American people deserve to know whether, in reletting this contract, the Department of Defense has finally acknowledged a problem with the original agreement and the contract processes that are being used today. The American people deserve to know whether the Department of Defense, on a regular basis, is letting other contracts to other companies in this fashion. The American people deserve to know whether the Department of Defense intends to continue this practice where it has not yet been discovered.

    If individual contractors are customarily setting the criteria for the work they plan to pursue, it seems to me there are serious conflict-of-interest issues that the Department of Defense should be working immediately to root out.

    When you consider the Kellogg, Brown and Root contracts are so-called cost-plus contracts, this arrangement becomes even more unacceptable. Cost-plus lets companies spend what they think is necessary, and after that they get to tack on a percentage fee to make a profit. The more taxpayer dollars the company spends, the more profit they bring home. In effect, these contracts send out a message that the Treasury is open. If you are wasteful and inefficient, don't sweat it because the taxpayer is just going to pick up the bills.

    A number of Iraqi reconstruction contracts, not just the Kellogg, Brown contract, have been designed in this way. If the Defense Department is going to spend my constituents' money in this manner without asking for a competitive bid, my constituents deserve to know why.

    I have just been having community, townhall meetings in a number of our small, rural communities. I was recently in Gold Beach, OR, at a townhall meeting. Folks there were talking about the difficulty they face getting money for dredging, which is critically important. It is the lifeblood of these small, rural communities on the Oregon coast. They have to battle for every dime in order to get the funds for dredging. I can tell you my constituents in Gold Beach, Coos Bay, Pendleton, and Portland—across the State of Oregon—are saying there is no place for waste. With respect to these Iraqi reconstruction contracts and various other contracts with Iraq, they want to make sure that not only is there no waste, but there should not be any possibility for impropriety.

    I understand that in some cases, there may be valid reasons for the awarding of contracts that seem suspect to the untrained eye. One explanation I have heard repeatedly is the need to award some contracts quickly. Another is the need for security clearances. But I cannot imagine that the need to move quickly is a valid justification for ignoring experience as a criterion, nor does a security clearance seem necessary for rebuilding a sewer system.

    As a Member of the Intelligence Committee, I had thought these arguments were pretty shaky before. I said then, and I will repeat it tonight. I believe the Department of Defense and other agencies involved in reconstruction would have a more open process and greater credibility if they knew they had to face the public on these important issues.

    The fact is: The Pentagon has kept the American taxpayer in the dark. The American people at present do not know how the select group of contractors was chosen, how much the reconstruction of Iraq will cost or how long it will take.

    Tonight, with the adoption of the legislation authored with Senator Byrd, we are going to be in a position to finally get on top of those issues.

    I want to express my appreciation to a number of the Senators on the Appropriations Committee, particularly Senator Stevens, the distinguished chairman of the full committee, and Senator Byrd, the ranking member of the Defense Appropriations Committee, and the distinguished subcommittee chair of that committee, for working closely with me and my colleagues on this legislation.

    Recently, the New York Times reported the current supply of about $7 billion for rebuilding Iraq includes $1.7 billion for Iraqi assets frozen in U.S. banks, $900 million found hiding in Iraq, and about $1.6 billion from Iraqi oil sold before the war. The United Nations is holding about $1 billion for development, and Congress has already appropriated $2.4 billion for reconstruction contracts. The occupation administrator is reportedly seeking about $6 billion for the remainder of this year, and "the amount for 2004 will be considerably higher." Independent sources familiar with Iraq have put the price tag at upwards of $100 billion.

    The Pentagon just last week informed Congress that the monthly cost of military operations is really twice what they predicted in April, or nearly $4 billion. Secretary of Defense Rumsfeld called this a "burn rate" of $1 billion a week. My question then becomes, Will the administration have to effect a similar doubling of the projected reconstruction costs? What sort of a "burn rate" can the American people expect on the reconstruction side of the ledger?

    We have seen the costs go up and up with respect to military operations. Suffice it to say, I think there is every reason to believe that will be the case with respect to reconstruction contracts as well.

    What Senator Byrd and I have said—and we are very pleased the Senate on a bipartisan basis has accepted our amendment—is it is time for some accountability, and it is time for real and independent oversight with respect to these contracts.

    What is needed are clear processes and standards for designing and awarding contracts. What is needed are clear criteria for justifying sole-source contracts. What is needed are mechanisms to provide independent oversight over contractors. What is needed are policies to prevent conflicts of interest. What is needed are policies to prevent waste, fraud, and abuse. What is needed are ways to assure the percentage of profits is determined for cost-fixed-fee contracts in a way that protects our taxpayers. Finally, what is needed is a list of all contracts for reconstruction and other services in Iraq and their overall expected costs and duration.

    This week the civil administrator Paul Bremer said that just over the next 6 months Iraqi oil revenues will be $2 billion short of what will be needed to finance occupation and reconstruction. He admitted that reconstruction of Iraq is "not going to be self-financing." Newsweek magazine called these numbers "misleading."

    What this means, in plain English, is that U.S. taxpayers are going to get stuck funding the difference for a number of months and for the foreseeable future.

    We believe the pattern of secretive and closed bidding for these construction contracts is unacceptable. It seems to me the American people have a right to hear if there are reasons for sole-source and invitation-only contracts for these projects. If something is amiss in the Iraqi reconstruction contracting process, then the oversight and the accountability—as Senator Byrd and I have called for in the legislation accepted tonight—is going to bring that to light. It is high time Congress and the American people arrive at fair judgments about these difficult issues with respect to funding the reconstruction of Iraq. The American people deserve real accountability at a time when we need the money here at home for our schools, for our health care facilities, for our roads, and for the critical needs of strengthening our economy.

    I think it is a significant step the Senate has taken. It assures this will now be an effort to establish true oversight and accountability over the billions of dollars that are being spent now and that will be spent with respect to reconstructing Iraq and other services in that country.

    I thank Senator Byrd for his patience and assistance in this legislation.

    Again, I express my appreciation to Chairman STEVENS for helping us to draft this in a way that will win bipartisan support.

    I yield the floor.