US: Audit Critical, but Firm Gets U.S. deals

The U.S. government has continued to award multimillion-dollar health-care consulting contracts to a company that in February was severely criticized by federal auditors for mishandling a $43.8 million pact to improve Iraq's health-care system.

The company, Abt Associates of Cambridge, Mass., failed to do most of what it promised to help Iraq's health ministry in the year after the 2003 invasion, according to the audit by the inspector general for the U.S. Agency for International Development, which has not previously been reported in the news media.

One subcontractor, speaking of lengthy delays in getting desperately needed equipment and supplies to Iraq's hospitals, was quoted in the audit as saying that he had "never witnessed such a debacle" in two decades of working for the U.S. development agency.

The audit concluded that Abt's work "offered little, if any, benefit." The company's funding was cut due to its poor performance, but American taxpayers nevertheless paid the firm a total of $23 million for its work in Iraq, the audit said.

Abt officials declined to respond to questions about the audit, referring a reporter to the development agency. In a November report posted on the Internet, the Abt official in charge of the contract, Gerald A. Evans, wrote that the firm "contributed a great deal to the strengthening of the Iraqi health-care system." He acknowledged problems but blamed them on unspecified security threats.

James Stephenson, the development agency's chief of mission in Iraq, said in a written response to the audit that the agency agreed with the findings. In January 2004, the audit says, the agency was unhappy enough with Abt's performance that it cut its contract to $22.6 million, a figure later raised to $23 million.

Those conclusions did not stop the agency from awarding a $30 million contract to Abt in March to advise on U.S.-funded health-care programs in Central Asia and a $45 million contract in April to help Jordan improve its health-care system.

A spokeswoman for the development agency said last week that Abt had a good track record in health-care consulting and that the agency considered its Iraq experience an aberration.

"They have worked with us in other areas around the world and have had successful results," spokeswoman Heather Layman said. "It's unfortunate that this is one of the few cases where it didn't quite work out."

Abt, with about 1,000 employees, has long been consulting for various federal agencies on social research and international development issues. From 1990 to 2002, the company received nearly $908 million in U.S. government contracts, according to the Center for Public Integrity, a nonprofit watchdog group that investigated the backgrounds of Iraq contractors.

Abt's vice president for international development, Janet Ballantyne, joined the company in 2002 after serving as counselor and acting deputy administrator at the Agency for International Development, the same agency that awarded Abt the Iraq contract.

Federal ethics rules prohibited Ballantyne from having any contact with the agency for a year after she left, and USAID officials said last week that she had adhered to those rules.

Shortly after Baghdad fell in April 2003, the development agency awarded Abt a "cost plus, fixed fee" contract of up to $43.4 million to "strengthen the overall health system and ensure the rapid normalization of health services," according to the audit. It was initially a one-year deal, but it later was extended through November 2004. The contract was part of a huge American effort to improve Iraq's basic services.

In the summer of 2003, Abt and U.S officials agreed on a set of contract goals. That list eventually was whittled down to 47 activities, 51 percent of which were never achieved by Abt, auditors found. Abt finished just 40 percent of what it pledged to do, and partially completed 9 percent.

Abt's chief achievement, the auditors found, was in hosting a series of meetings that helped Iraqi officials draft a document titled "Vision for the Iraq Health System."

Abt failed to carry out a household health survey and a quality-improvement program it had promised, auditors found. The company put together a database on the state of Iraq's health facilities, but Iraqis who later tried to use it found it disabled by a virus and unreadable, the audit said.

Abt's most egregious failure, according to the audit, was in the mishandling of a program designed to deliver 600 medical kits to Iraqi hospitals. At the time, hospitals were suffering severe shortages of drugs and equipment that doctors said were leading to unnecessary deaths.

The kits were supposed to have been delivered by October 2003, but by November 2004 they still had not all been sent, auditors found. Some of the kits arrived with missing or damaged items.

"Based on a review of the correspondence and other records on file at the [agency], we determined that this delay was partly due to the amount of time Abt took to arrange this procurement," auditors wrote.

In March 2004, The Inquirer reported on Iraq's health system, touring filthy, underequipped hospitals and quoting doctors and administrators who said the system was in utter disarray.

"We don't have ointments," physician Muhammad Hihad said as he stood in a crowded emergency room. "We don't have bandages. Why do they die? They die because of things we don't have."

Abt's written response did not explain in detail why the firm failed to complete its contract work plan, but it suggested that security was a major factor. Yet in the year after the Iraqi invasion, the threat for Westerners in Iraq was not nearly what it is now.

Other contractors hired by the development agency in that period - for example, five nonprofit aid groups that were paid $38 million to do small construction and relief projects under a "community action program" - were able to complete 98 percent of their tasks, according to a separate audit by the inspector general.

The audit of Abt's contract is a small window into a multibillion-dollar U.S.-funded Iraq reconstruction process that was rife with waste, mismanagement and misjudgments, according to several audits and inquiries. Among the findings of investigators:

At least $1 billion in taxpayers' money was wasted by inefficient spending in Iraq, according to the U.S. comptroller, the federal government's top fiscal watchdog.

Auditors could not account for at least a third of the government property that mega-contractor Halliburton Co. was paid to manage for the occupation authority, the inspector general found.

The United States has opened a criminal inquiry into suspected embezzlement by American officials in the southern town of Hillah who failed to account for almost $100 million they disbursed for Iraqi reconstruction projects.

For More Information

The audit: http://www.usaid.gov/oig/public/fy05rpts/e-267-05-002-p.pdf

Abt's own report on its Iraq contract: http://www.dec.org/pdf_docs/

PDACA956.pdf

Abt's Web site: www.abtassociates.com

USAID's Web site: www.usaid.gov

March 2004 Inquirer/Knight Ridder report on Iraq's hospitals: http://www.realcities.com/mld/

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