IRAQ: Army Cancels Contract for Iraqi Prison

The Army Corps of Engineers said Monday that it had canceled a $99.1 million contract with Parsons, one of the largest companies working in Iraq, to build a prison north of Baghdad after the firm fell more than two years behind schedule, threatened to go millions of dollars over budget and essentially abandoned the construction site.

The move is another harsh rebuke for Parsons, only weeks after the corps canceled more than $300 million of the company's contracts to build and refurbish hospitals and clinics across Iraq. A federal oversight office had found that some of the clinics were little more than empty shells and that only 20 of 150 called for in the contract would be completed without new financing.

But the prison, originally scheduled to be completed this month, appears to be the largest single rebuilding project canceled for failing to achieve its goals under the $45 billion American rebuilding program for Iraq. The corps said Parsons officials had recently estimated that it could not be completed before September 2008, and would cost an additional $13.5 million.

"I have other contractors that hold to their schedules," said Maj. Gen. William H. McCoy Jr., commander of the corps' Gulf Region Division. "And when they hold to their schedules, there's no problem."

In the case of the prison contract, General McCoy said, "I've got to stop the bleeding."

The corps says it intends to complete 3,700 rebuilding projects. But that number is much smaller than once planned and there is no independent overall assessment of their success. For example, among the water and sanitation projects, only 49 of the 136 projects originally envisioned are expected to be completed, according to Stuart W. Bowen Jr., who leads the office of the Special Inspector General for Iraq Reconstruction, an independent federal oversight office.

The move over the prison contract pushes further into the open a series of bitter disagreements between Parsons and the corps over who is ultimately responsible for the failure of its rebuilding projects. When a senior Parsons official was informed by telephone that General McCoy had released word of the cancellation, the official replied, "He would, wouldn't he?"

The official referred a reporter to Parsons corporate headquarters in the United States for permission to conduct an interview for attribution about the development. But the request was turned down, and the company released a brief statement through a spokeswoman instead.

"Parsons performed our work in Iraq in conformance with the contract terms and the direction given to us by the U.S. government," said the spokeswoman, Erin Kuhlman, by e-mail. "We're extremely proud of our dedicated employees who have performed very well under extremely difficult and dangerous circumstances."

Another corps official, Col. Andrew Q. Knapp, said that even the new September 2008 completion date cited by Parsons was not realistic because the company had stopped working on the site two months ago. "So the date's kind of meaningless," Colonel Knapp said.

The company declined to clarify why it had stopped the work.

The largest single project previously canceled in Iraq appears to have been a $75.7 million dollar contract that called for KBR, formerly Kellogg Brown & Root, to restore a set of oil pipelines across the Tigris River.

The loss of business for Parsons in Iraq may not be over. General McCoy said a broad review of Parsons' work in Iraq had turned up problems in sector after sector. According to news releases on the Parsons Web site, the company has received contracts worth as much as $4 billion in Iraq.

Parsons' contracts with the corps called for building and refurbishing scores of police stations, border forts, fire stations, courthouses, prisons and Iraqi government buildings. "We found overruns in almost every case," General McCoy said.

Corps officials also said that they had asked the company to explain delays and overruns on another prison project, south of Nasiriya, for which it has an $82.7 million contract.

Mr. Bowen, the inspector general, said after he issued a pair of scathing reports on the clinics that he intended to review all of the Parsons work in Iraq. Mr. Bowen's reports said the $243 million program to build 150 clinics would complete only 20 unless new financing were found.

In some cases, the reports found, the clinics were little more than empty shells of uneven bricks and concrete that were already crumbling into dust. But those reports focused much of their criticism on what they called the failure of the corps to exercise proper oversight of the work.

Shortly after those reports were issued, General McCoy canceled the clinics contract, and shortly thereafter voided a $70 million Parsons project to refurbish 20 hospitals in Iraq. General McCoy said Sunday that he had found $62 million in his budget to finish the remaining clinics by letting construction contracts directly to Iraqi companies.

The general said he would also contract directly with Iraqi companies to finish the 1,800-inmate prison, the Khan Bani Saad Correctional Facility. Colonel Knapp said that about 40 percent of the project had been completed and that what was in place appeared to be sound.

"It's just primarily cost and schedule," Colonel Knapp said of the reasons for canceling the Parsons prison contract. "There's an urgent need for prisons right now for the country of Iraq, and it's simply not getting there fast enough."

An inspection team led by Mr. Bowen visited the Nasiriya prison project in May and found that the workmanship was good but that the construction schedule had slipped by nearly a year for reasons no one there could explain. General McCoy said he was aware of Mr. Bowen's findings and asked the company for an explanation.

"We've given them about 10 days to come back to us," General McCoy said.

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