L.A. Times (July 29, 2008)

Pasadena's Parsons Corp. blamed in failure of $40-million Iraq prison project

A U.S. government audit says the engineering firm received $142 million for facilities in the country, including Khan Bani Saad, that were never completed.
By Jim Puzzanghera and Peter Spiegel
Los Angeles Times Staff Writers

July 29, 2008

WASHINGTON — A half-completed prison in Iraq that cost $40 million marked the biggest reconstruction failure identified to date by a U.S. government watchdog, which on Monday laid responsibility for the project with a Pasadena contractor.

The company, Parsons Corp., said the project was too dangerous to finish.

The Khan Bani Saad Correctional Facility, just north of Baghdad, was one of several projects cited in an audit of Parsons' security and justice-related contracts released by the Office of the Special Inspector General for Iraq Reconstruction. The audit found that Parsons, one of the largest construction contractors in the $50-billion U.S. effort to rebuild Iraq, received $142 million for prisons and other facilities that were never completed.

"It's the largest shortfall we've uncovered for a single project," Stuart W. Bowen Jr., the special inspector general for Iraq reconstruction, said of the Khan Bani Saad facility. His office has spent four years auditing efforts to rebuild the war-torn country.

The shortfall tops that of another Parsons project, the Baghdad Police College. Bowen's office estimated last year that the U.S. government would end up paying Parsons $62 million to construct and renovate the police facility, a project that was poorly managed and riddled with severe plumbing problems.

"At least the Baghdad Police College is open, operating and graduating police officers," Bowen said in an interview. "The Khan Bani Saad prison will apparently never house prisoners."

In a lengthy statement, Parsons said it did its best given the violence in Iraq. It noted that one of its subcontractors on the prison project was fatally shot while sitting in his office in Khan Bani Saad.

"The Khan Bani Saad corrections facility was a uniquely difficult assignment," the firm said. "The facility was located in a region plagued by violent sectarian warfare, particularly during the months that Parsons was on that project."

The 48-page audit highlighted the difficulties the Pentagon has encountered in trying to rebuild key facilities and infrastructure after the U.S.-led invasion to oust former Iraqi leader Saddam Hussein. Parsons landed one of the largest rebuilding contracts -- $900 million -- focusing on security infrastructure.

The audit said the projects Parsons completed "resulted in material improvements in Iraqi security and justice infrastructure." But only 18 of the 53 construction projects were considered successful and completed. About two-thirds were terminated or canceled, accounting for $142 million of the $333 million Parsons has received from the U.S. for its work in Iraq.

"Far less was accomplished under this contract than was originally planned," the audit said.

Parsons received the contract to build the Khan Bani Saad prison in May 2004. The facility -- including one maximum-security building, three medium-security buildings and 15 other structures -- had a price tag of $73 million. But "continued schedule slips" and "massive cost overruns" led the U.S. government to cancel Parsons' contract in 2006.

Bowen said that the prison was left "grievously incomplete." When U.S. authorities attempted to turn it over to the Iraqi government, the deputy justice minister "refused to accept it," saying Baghdad would not complete it or provide security for the unfinished facility, Bowen said.

Only 52% of the project was finished. Of the $40 million the U.S. government paid, $31 million went to Parsons and $9 million to other contractors, the audit said.

Parsons said security was a major problem at the site. It said that three contractors subsequently hired to finish the work "experienced similar disruptive violence" and that the U.S. abandoned the project in 2007 "because it was too dangerous." The audit confirmed that the site manager for one of Parsons' subcontractors was fatally shot in his office in August 2005.

"Parsons argued that the U.S. government misrepresented that there would be a permissive, benign environment for Parsons to work," according to the report. "Parsons claimed that on an almost daily basis, its subcontractors faced security threats that either shut down work or curtailed performance."

But auditors said Parsons was aware of the security issues and that logs kept by the U.S. Army Corps of Engineers showed the company cited violence as the reason for only seven days of delays.

U.S. officials found that Parsons "provided inadequate field oversight" of the project, according to the audit report.

Auditors also said U.S. government oversight of Parsons' contract was inadequate and hindered by high turnover. A contract the size of Parsons' for security and justice infrastructure might have 50 to 60 contracting officers overseeing it if it were taking place in the U.S. Only 10 to 12 officers oversaw it in Iraq.