Overhead reached 55 percent in some Iraq contracts

[The Straight Story]

Overhead reached 55 percent in some Iraq contracts

By Jenny Mandel
[e-mail]

Overhead and administrative costs on Iraq reconstruction projects have run as high as 55 percent of total spending and could be even higher with full accounting, according to data in a new inspector general report.

In a review of 12 large reconstruction contracts awarded in early 2004 by an Army contracting office, the Special Inspector General for Iraq Reconstruction found that contractors -- including construction giants Parsons Delaware Inc., Halliburton subsidiary KBR Inc. and Fluor Corp. -- charged the government from 11 percent to 55 percent for overhead and administration.

The contracts, all for design-build projects in which a single contract covers both stages of construction, were to be issued using new administrative task orders to help managers see the balance of direct and indirect costs, minimize administrative expenses and better understand how extending contracts affects indirect expenses, the Oct. 23 report stated.

Reviewers found that the long idle periods between the time that contractors were first told to mobilize their employees to Iraq and when substantive work began on projects, contributed significantly to indirect costs. Due partly to political changes on the ground in Iraq, the five contracts for which officials used the new administrative task orders were largely idle from March to November 2004. During that time, the contractors were fully mobilized and incurred expenses to house, manage and protect their employees. The companies submitted invoices for $62.1 million in indirect costs, while claiming just $26.7 million in direct costs.

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