IRAQ: Rethinking Reconstruction as Grand U.S. Plan Fractures Again

For the third time in nine months, the Bush administration has redrafted its project to rebuild Iraq, forcing planners to cancel more of the water, sewage and power plants that were part of the grand American design to transform the shattered country.

Many of the halted projects are now described by American officials as "noncritical" and "long term" because they are scheduled to start two years from now.

The need for the reallocation of money grew not only from unanticipated security costs but also from what many experts said were flawed assumptions by Pentagon planners and Congress when they set out to pepper Iraq with large infrastructure projects built by American companies. The latest changes mean less money being spent on building new facilities and more on training and maintenance, with less reliance on expensive Western firms and more on smaller local firms.

The redirected funds, together with previous shifts, account for $4.8 billion of the $18.4 billion in aid approved by Congress.

The administration describes the changes as a natural midstream adjustment. James Dobbins, who has headed reconstruction efforts in Afghanistan and elsewhere, said State Department officials deserved credit for bowing to reality.

"They describe this as a response to changing circumstances," said Mr. Dobbins, now with the RAND Corporation in Washington. "But the shifts are in part a response to a faulty initial strategy."

When the State Department took over the aid program from the Pentagon last summer, it reallocated $3.46 billion from infrastructure building to meet spiraling security needs, train more Iraqi police officers and start large work programs.

In December and again in March, a total of $1.3 billion was shifted from building programs to training, job programs and security, according to a State Department report to Congress issued April 6.

The recent changes, the report said with unusual candor, are mainly needed to salvage the facilities already repaired or built, many of which are barely functioning. Iraqis tend to fault poor American planning for the breakdowns while American contractors point the finger at poor Iraqi management.

New efforts in training and maintenance are needed, the report said, "to avoid the shutdown of critical facilities we help rebuild."

In addition, American aid officials in Iraq now recognize that refurbished electrical and water plants do not help many people until new wiring and pipes are run into individual homes - less technological but in some ways more arduous tasks. Thus, between poor management of regional grids and chaotic local wiring, urban residents still suffer frequent blackouts even as electrical power capacity climbs.

In the case of oil, which provides Iraq with virtually all its revenues, production is lagging despite American spending of well over $2 billion. The northern oil fields are often rendered useless because of insurgent attacks on key pipelines.

In southern Iraq, oil production is constrained by a breakdown of the system that pressurizes underground petroleum reservoirs with injections of water. The Halliburton subsidiary Kellogg Brown & Root repaired the crucial water plant soon after the main fighting ended in Iraq, at high expense. But the oil fields still receive little water, aid officials report, because the aged pipes carrying water to the oil fields break so often. The Iraqi insurgency, of course, also has caused huge delays.

As of March 29, about two-thirds of the $18.4 billion voted by Congress in 2003 had been committed to actual projects, and only $4.2 billion had been disbursed for work completed. Earlier in 2003, the administration spent an additional $2.5 billion of American funds on reconstruction, and the coalition authority also spent billions in Iraqi funds on oil field and other repairs.

Contractors have had to devote as much as 25 percent of their spending to security, and construction work often has been halted.

Adding to the expense, officials now lament, the contracts signed with international firms allowed them to keep billing the United States for personnel and overhead expenses even when they could not work. The administration is "shifting work to Iraqi subcontractors that are somewhat less susceptible to insurgency attacks and are not burdened by the same heavy overhead expenses of foreign firms," the State Department report said.

Rick Barton, an expert in reconstruction at the Center for Strategic and International Studies in Washington, said the report showed the aid program was adapting, but that it had a hard legacy to overcome.

"We started out with a monster master plan that didn't address the need for tangible and quick progress," he said.

• 174 War & Disaster Profiteers Campaign