This is the accessible text file for GAO report number GAO-05-737 
entitled 'Rebuilding Iraq: Actions Needed to Improve Use of Private 
Security Providers' which was released on July 28, 2005. 

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as part 
of a longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to Webmaster@gao.gov. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

Report to Congressional Committees: 

July 2005: 

Rebuilding Iraq: 

Actions Needed to Improve Use of Private Security Providers: 

GAO-05-737: 

GAO Highlights: 

Highlights of GAO-05-737, a report to congressional committees: 

Why GAO Did This Study: 

The United States is spending billions of dollars to reconstruct Iraq 
while combating an insurgency that has targeted military and contractor 
personnel and the Iraqi people. This environment created a need for 
those rebuilding Iraq to obtain security services. GAO evaluated the 
extent to which (1) U.S. agencies and contractors acquired security 
services from private providers, (2) the U.S. military and private 
security providers developed a working relationship, and (3) U.S. 
agencies assessed the costs of using private security providers on 
reconstruction contracts. 

What GAO Found: 

The civilian U.S. government agencies and reconstruction contractors in 
Iraq that GAO evaluated have obtained security services, such as 
personal and convoy security, from private security providers because 
providing security to them is not the U.S. military’s stated mission. 
U.S. military forces provide security for those Department of Defense 
(DOD) civilians and contractors who directly support the combat 
mission. In Iraq, the Department of State and other federal agencies 
contract with several private security providers to protect their 
employees. Under their contracts, contractors rebuilding Iraq are 
responsible for providing their own security and have done so by 
awarding subcontracts to private security providers. As of December 
2004, the agencies and contractors we reviewed had obligated more than 
$766 million for private security providers. The contractors’ efforts 
to obtain suitable security providers met with mixed results, as they 
often found that their security provider could not meet their needs. 
Overall, GAO found that contractors replaced their initial security 
providers on more than half the 2003 contracts it reviewed. Contractor 
officials attributed this turnover to various factors, including the 
absence of useful agency guidance. 

While the U.S. military and private security providers have developed a 
cooperative working relationship, actions should be taken to improve 
its effectiveness. The relationship between the military and private 
security providers is one of coordination, not control. Prior to 
October 2004 coordination was informal, based on personal contacts, and 
was inconsistent. In October 2004 a Reconstruction Operations Center 
was opened to share intelligence and coordinate military-contractor 
interactions. While military and security providers agreed that 
coordination has improved, two problems remain. First, private security 
providers continue to report incidents between themselves and the 
military when approaching military convoys and checkpoints. Second, 
military units deploying to Iraq are not fully aware of the parties 
operating on the complex battle space in Iraq and what responsibility 
they have to those parties. 

Despite the significant role played by private security providers in 
enabling reconstruction efforts, neither the Department of State, nor 
DOD nor the U.S. Agency for International Development (USAID) have 
complete data on the costs of using private security providers. Even at 
the contract level, the agencies generally had only limited information 
readily available, even though agency and contractor officials 
acknowledged that these costs had diverted a considerable amount of 
reconstruction resources and led to canceling or reducing the scope of 
some projects. For example, in March 2005, two task orders for 
reconstruction worth nearly $15 million were cancelled to help pay for 
security at a power plant. GAO found that the cost to obtain private 
security providers and security-related equipment accounted for more 
than 15 percent of contract costs on 8 of the 15 reconstruction 
contracts it reviewed.

What GAO Recommends: 

GAO is making recommendations to the Secretary of Defense to enhance 
military procedures to reduce incidences of the military firing on 
security providers and to provide training to U.S. military forces on 
the role of security providers. Also, GAO is making recommendations to 
the Secretaries of Defense and State and the Administrator, USAID, to 
assist contractors in obtaining security services, and to enable 
agencies to better plan for security costs in future efforts. The State 
Department disagreed with our recommendation to explore options to 
assist contractors in obtaining security, citing potential liability 
concerns, and did not take a position on our recommendation to account 
and plan for security costs. DOD agreed with our recommendations. USAID 
did not comment on them.

www.gao.gov/cgi-bin/getrpt?GAO-05-737.

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact William M. Solis at (202) 
512-8365 or solisw@gao.gov.

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Security for Civilians and Contractors in Iraq Is Provided by a Mix of 
Military Forces, State Department Security Personnel, and Private 
Security Providers: 

While the Relationship between Security Providers and the Military Has 
Improved, Actions Should Be Taken to Further Improve Effectiveness: 

Agencies Have Limited Capabilities to Assess the Cost Impact of Using 
Private Security Providers: 

Expanded Use of Private Security Providers Does Not Appear to Be 
Increasing Attrition among Military Personnel: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendixes: 

Appendix I: Scope and Methodology: 

Appendix II: Comments from the Department of Defense: 

Appendix III: Comments from the Department of State: 

Appendix IV: Comments from U.S. Agency for International Development: 

Appendix V: GAO Contacts and Staff Acknowledgements: 

Table: 

Table 1: Occupational Stop Loss Dates for the Military Services: 

Figures: 

Figure 1: The Complex Battle Space in Iraq: 

Figure 2: Incidence of Attacks against Civilians and Infrastructure 
Targets between June 2003 and April 2005: 

Figure 3: Number of Security Providers Employed on Reconstruction 
Contracts Awarded in 2003 and Reviewed by GAO: 

Figure 4: National Reconstruction Operations Center, Baghdad, Iraq: 

Figure 5: Locations of the Regional Reconstruction Operations Centers 
in Iraq: 

Figure 6: Process for Requesting Assistance through the ROC: 

Figure 7: Percentage of Total Contract Billings Accounted for by 
Security Subcontractor Expenses as of December 31, 2004: 

Figure 8: Average Attrition Rates for Military Occupational Specialties 
Preferred by Private Security Providers which Experienced Increased 
Attrition in Fiscal Year 2004: 

Figure 9: Army Special Forces Attrition Rates: 

Figure 10: Continuation Rates for Army Enlisted Special Operations 
Personnel with 14 through 19 Years of Service for Fiscal Years 2000 
through 2004: 

Letter July 28, 2005: 

Congressional Committees: 

The United States is spending billions of dollars to reconstruct Iraq 
while at the same time is engaged in combating an insurgency that has 
targeted military personnel, contractors, and the Iraqi people. 
According to the Department of Defense (DOD) and other sources, as of 
June 1, 2005, more than 1,600 U.S. and coalition military forces and 
200 contractor personnel have been killed since major combat operations 
ended in May 2003. This uncertain security environment created a need 
for U.S. government agencies and contractors involved in rebuilding 
Iraq to obtain substantially more security services than is normally 
the case when operating in other countries. Creating a democratic Iraq 
and rebuilding its infrastructure is a U.S. national security and 
foreign policy priority, and, even without the need for enhanced 
security, is a challenging and complex effort. 

Prior to the conflict, DOD and the U.S. government agencies responsible 
for the reconstruction of Iraq believed that reconstruction would take 
place in an environment with little threat from insurgents or 
terrorists. By June 2003 the security situation in Iraq began to worsen 
and it became clear in August 2003, with the bombing of the United 
Nations complex, that insurgents were targeting nonmilitary targets. 
The killings of four U.S. citizens working for a U.S. security provider 
in Iraq in March 2004 and the allegations of prisoner abuse at Abu 
Ghraib prison[Footnote 1] resulted in significant congressional 
concern[Footnote 2] over the use of private security providers in Iraq 
and raised a number of operational, legal, and contracting questions. 

Because of the broad level of interest by Congress in issues dealing 
with Iraq, the Comptroller General initiated this review under his 
statutory authority. Specifically, we evaluated the extent to which (1) 
U.S. government agencies and contractors working in Iraq have acquired 
security services from private providers; (2) the U.S. military and 
private security providers in Iraq have developed a cooperative working 
relationship; and (3) U.S. government agencies assessed the costs 
associated with using private security providers on reconstruction 
contracts. Additionally, we assessed the impact of the increased use of 
private security providers on attrition in key military skills. 

To identify the rules and regulations governing and assigning 
responsibility for protecting government and contractor personnel 
working in Iraq, we reviewed policies, regulations, instructions, 
guidance, and orders issued by DOD, the U.S. Central Command 
(CENTCOM),[Footnote 3] and other DOD components relating to the use of 
contractors during wartime; orders and policies issued by the Coalition 
Provisional Authority (CPA) regarding contractor operations in Iraq; 
and Department of State policies regarding the protection of U.S. 
government employees working abroad, including the Foreign Affairs 
Manual. We also interviewed military officials who had been stationed 
in Iraq as well as selected private security providers to understand 
their responsibilities and collaborative working relationship in Iraq. 
To understand the process by which contractors obtained private 
security providers, we selected 16 reconstruction contracts using a non-
probabilistic methodology that considered such factors as the awarding 
agency; the year awarded; the contract's expected dollar value; and the 
type, nature and location of the reconstruction activity. These 16 
contracts were awarded by various DOD components, including the U.S. 
Army Corps of Engineers; the Department of State; and the U.S. Agency 
for International Development (USAID). Nine of these contracts were 
awarded in 2003 and 7 were awarded in 2004. As of December 2004, the 
agencies had obligated about $8.6 billion on these contracts. We also 
obtained and reviewed six contracts that had been awarded the U.S. Army 
Corps of Engineers, the Department of State, USAID, and by Army 
activities on behalf of the CPA for the protection of their personnel 
and facilities in Iraq. We then compared the type of security-related 
requirements incorporated within U.S. government contracts with those 
incorporated into contracts awarded to prime reconstruction contractors 
and, in turn, to subcontracts with security providers. We interviewed 
agency and contractor officials, reviewed agency guidance provided to 
the contractors, reviewed the reconstruction contracts and security 
subcontracts, and analyzed the vouchers and other billing information 
submitted by the reconstruction contractors and security providers. To 
assess the impact on military attrition caused by the use of private 
security providers we obtained and analyzed DOD attrition data and 
spoke with private security providers and representatives of the U.S. 
Special Operations Command and the military services. We determined 
that the information and data discussed in this report were 
sufficiently reliable for the purposes of the report. Appendix I 
contains more detail on our scope and methodology. We conducted our 
review from May 2004 to June 2005 in accordance with generally accepted 
government auditing standards. 

Results in Brief: 

All but one of the civilian U.S. government agencies and reconstruction 
contractors we evaluated that are operating in Iraq have obtained 
security services from private security providers. As of December 2004, 
the agencies and contractors we reviewed had obligated more than $766 
million for private security providers. The use of private security 
providers reflects the uncertain security environment that was, and is 
still being encountered in Iraq, as well as the fact that providing 
security for agencies and contractors is not part of the U.S. 
military's stated mission. U.S. military forces in Iraq provide 
security only for those DOD civilians and contractors who directly 
support the military's mission. In Iraq, as elsewhere, the U.S. 
Ambassador, as Chief of Mission, has overall responsibility for the 
security of U.S. government executive branch employees, except for 
those under the force protection of the combatant commander. However, 
individual U.S. government agencies have had to arrange for their own 
security services. As neither DOD nor the Department of State is 
responsible for providing security to reconstruction contractors, the 
terms of their contracts require reconstruction contractors to provide 
for their own security; and, they typically have done so by awarding 
subcontracts to private security providers. The contractors' efforts to 
obtain suitable security providers met with mixed results, as many 
subsequently found that their initial security providers could not meet 
their needs. Overall, we found that contractors replaced their security 
providers on five of the eight reconstruction contracts awarded in 2003 
that we reviewed.[Footnote 4] Contractor officials attributed this 
turnover to various factors, including their lack of knowledge of the 
security market and of the potential security providers, and the 
absence of useful agency guidance. 

Although the U.S. military and private security providers generally 
have developed a cooperative working relationship, actions can be taken 
to further improve its effectiveness. The relationship between the 
military in Iraq and employees of private security providers is one of 
coordination and cooperation, not control. Both U.S. Central Command 
officials and military personnel previously stationed in Iraq told us 
that there is no command and control relationship between the military 
and private security provider employees. At the same time, military and 
private security provider employees recognize the need to coordinate 
their actions. Prior to October 2004, coordination was informal, based 
on personal contacts often initiated by the contractors, and it was 
inconsistent. In October 2004, the Project and Contracting Office 
opened the Reconstruction Operations Center to share intelligence and 
coordinate military contractor interactions. While providers and the 
military agree that coordination has improved since the advent of the 
operations center, some problems remain. First, private security 
providers continue to report incidents occurring between themselves and 
the military when they approach military convoys and checkpoints. 
Second, the military may not have a clear understanding of the role of 
contractors, including private security providers, in Iraq and of the 
implications of having private security providers on the battle space. 

Despite the significant role played by private security providers in 
enabling reconstruction efforts to proceed, neither the Department of 
State, nor DOD, nor USAID--the principal agencies responsible for Iraq 
reconstruction efforts--have complete data on the costs associated with 
using private security providers. In turn, the Department of State's 
quarterly report to Congress, which describes the status of projects, 
initiatives, and funding dedicated to Iraq reconstruction, does not 
provide information on the costs associated with using private security 
providers. Our discussions with agency officials found that the 
financial management and information systems used to prepare the 
reports are not set up to track security costs that are incurred under 
reconstruction contracts. Even at the contract level, the agencies 
generally had only limited information readily available on the costs 
associated with private security providers. While agencies do not 
specifically track such costs, both agency and contractor officials 
acknowledged that security costs had diverted a considerable amount of 
reconstruction resources and led to canceling or reducing the scope of 
certain reconstruction projects. For example, in March 2005, USAID 
cancelled two electrical power generation-related task orders totaling 
nearly $15 million to help pay for increased security costs being 
incurred at another power generation project in southern Baghdad. 

Our review of 16 reconstruction contracts found that the cost to obtain 
private security providers and security-related equipment can be 
considerable. Overall, these costs accounted for more than 15 percent 
on 8 of the 15 reconstruction contracts for which data were available. 
On only 4 of those 8 contracts, however, did the agencies receive 
security cost information. Agency officials noted that increased costs 
or delays in reconstruction projects also reflect non-security-related 
factors, such as changes in planned funding levels or higher material 
costs. 

While both Special Forces and military police officials believe that 
attrition is increasing in their military specialties, partially 
because of increased employment opportunities with private security 
providers, our review of DOD data shows that the attrition levels in 
fiscal year 2004 increased compared to fiscal years 2002 and 2003, but 
are similar to the levels seen in fiscal years 2000 and 2001, prior to 
the establishment of stop loss.[Footnote 5] This similarity indicates 
that former military members in the Special Forces and military police 
communities are leaving in the same proportions as before the attacks 
of September 11, 2001 but, according to Army officials, have a wider 
range of employment opportunities today. However, given that stop loss 
policies depress attrition rates, we are unable to determine whether 
the increase in attrition rates in fiscal year 2004 compared to fiscal 
years 2002 and 2003 was due to the end of stop loss or to actual 
increases in attrition. Moreover, DOD data does not indicate why 
personnel are leaving the military--only the fact that they are doing 
so. 

We are making recommendations to the Secretary of Defense to enhance 
military procedures to reduce incidences of the military firing on 
private security providers and provide training to U.S. military forces 
on the role of private security providers in Iraq. Additionally, we are 
making recommendations to the Secretary of Defense, the Secretary of 
State and the Administrator, USAID, which would enable contractors to 
obtain adequate security services, as well as enable government 
agencies to more efficiently plan for security costs in future 
reconstruction efforts. 

DOD agreed with each of the recommendations, noting that it welcomed 
our assistance in improving how DOD and its contractors can plan for 
and effectively execute contracts in a complex and changeable security 
environment. DOD's comments appear in appendix II. 

The Department of State disagreed with our recommendation to explore 
options to assist contractors in obtaining private security services, 
citing concerns that the government could be held liable for 
performance failures and noting it was unclear that a government- 
managed security contractor program would result in enhanced contractor 
security. While our work found that contractors had difficulty in 
obtaining security providers that met their needs and that they would 
have benefited from the agencies' assistance, we did not recommend a 
particular course of action nor recommend a government-managed security 
program. Rather, we recommended that the Department, working jointly 
with DOD and USAID, explore options to assist contractors that are 
unfamiliar with obtaining the type of security services needed in Iraq. 
Such an effort would necessarily entail a thorough assessment of the 
advantages, disadvantages and risk mitigation strategies of the 
potential options. The Department did not indicate whether it agreed 
with our recommendation to establish a means to account and plan for 
security costs. The Department's comments appear in appendix III. 

USAID found the report factually correct, but did not comment on the 
recommendations. USAID's letter appears in appendix IV. 

Background: 

The United States, along with its coalition partners and various 
international organizations and donors, has continued to support 
efforts to rebuild Iraq in the aftermath of the war that replaced 
Iraq's previous regime. From April 2003 to June 28, 2004, the CPA 
served as Iraq's interim government and was responsible for overseeing, 
directing, coordinating, and approving rebuilding efforts. With the 
establishment of Iraq's interim government, the CPA ceased to exist and 
its responsibilities were transferred to the Iraqi government or to 
other U.S. agencies. The Department of State is now responsible for 
overseeing U.S. efforts to rebuild Iraq. DOD's Project and Contracting 
Office (PCO)[Footnote 6] and the U.S. Army Corps of Engineers have 
played a significant role in awarding and managing reconstruction 
contracts. USAID has been responsible for various reconstruction and 
developmental assistance efforts, including those related to capital 
construction projects, local governance, economic development, 
education, and public health. 

As figure 1 demonstrates, the battle space in Iraq can best be 
described as complex. A complex battle space is one where military 
forces, civilian U.S. government agencies, international organizations, 
contractors, nongovernmental organizations, and the local population 
share the same geographical area. 

Figure 1: The Complex Battle Space in Iraq: 

[See PDF for image] 

[End of figure] 

Included on the complex battle space are private security providers. 
While there is no mechanism in place to track the number of private 
security providers doing business in Iraq or the number of people 
working as private security employees, DOD estimates that there are at 
least 60 private security providers working in Iraq with perhaps as 
many as 25,000 employees. The providers may be U.S. or foreign 
companies and their staffs are likely to be drawn from various 
countries, including the United States, the United Kingdom, South 
Africa, Nepal, Sri Lanka, or Fiji, and may include Kurds and Arabs from 
Iraq. Generally, private security providers provide the following 
services: 

* Static security - security for housing areas and work sites. 

* Personal security details - security for high-ranking U.S. officials. 

* Security escorts - security for government employees, contractor 
employees, or others as they move through Iraq. 

* Convoy security - security for vehicles and their occupants as they 
make their way into Iraq or within Iraq. 

* Security advice and planning. 

The CPA issued a number of orders or memoranda to regulate private 
security providers and their employees working in Iraq. Among these are 
CPA Order number 3, (Revised)(Amended) which described the types of 
weapons that can be used by private security providers; CPA Order 
number 17 (Revised), which stated that contractors (including private 
security providers) will generally be immune from the Iraqi legal 
process for acts performed in accordance with the terms and conditions 
of their contracts; and CPA memorandum number 17, which stated that 
private security providers and their employees must be registered and 
licensed by the government of Iraq. 

According to security industry representatives we contacted, there are 
no established U.S. or international standards that identify security 
provider qualifications in such areas as training and experience 
requirements, weapons qualifications, and similar skills that are 
applicable for the type of security needed in Iraq. Some security 
industry associations and companies have discussed the need for and 
desirability of establishing standards, but as of March 2005 such 
efforts are only in the preliminary stages of development. 

Security for Civilians and Contractors in Iraq Is Provided by a Mix of 
Military Forces, State Department Security Personnel, and Private 
Security Providers: 

U.S. civilian government agencies and reconstruction contractors have 
had to contract with private security providers because it is not part 
of the U.S. military's stated mission to provide security to these 
organizations. U.S. forces in Iraq provide security to contractors and 
DOD civilians who support military operations. The Ambassador is 
charged with generally ensuring the security of most executive branch 
employees in Iraq. Government agencies have contracted with a number of 
private security providers to provide personnel, escort, and site 
security. Reconstruction contractors are generally responsible for 
providing for their own security according to the terms of their 
contracts, and they have generally done so by contracting with private 
security providers. The contractors' efforts to obtain suitable 
security providers have met with mixed results. More than half of the 
contractors awarded contracts in 2003 replaced their security 
providers. Contractor officials attributed this turnover to various 
factors, including the contractors' need to acquire security services 
quickly, their lack of knowledge of the security market and potential 
security providers available to provide the type of security services 
required in Iraq, and the absence of useful agency guidance. Finally, 
while the U.S. military is not responsible for providing security for 
civilian agencies and reconstruction contractors, it does provide some 
services, such as emergency medical support, to U.S. government-funded 
contractors. 

The U.S. Military Provides Security for Civilians and Contractors Who 
Deploy with the Force: 

The stated mission of U.S. military forces in Iraq is to establish and 
maintain a secure environment, allow the continuance of relief and 
reconstruction efforts, and improve the training and capabilities of 
the Iraq Security Forces. As part of this mission, U.S. forces in Iraq 
provide security for DOD civilians who deploy with the force, non-DOD 
U.S. government employees who are embedded with the combat forces and 
contractors who deploy with the combat force. Among the contractors who 
deploy with the force are those that provide maintenance for weapon 
systems, those who provide linguistic and intelligence support to 
combat forces, and those who provide logistics support. Contractors who 
deploy with the force generally live with and directly support U.S. 
military forces and receive government-furnished support similar to 
that provided to DOD civilians. 

According to CENTCOM officials, the military uses soldiers rather than 
private security providers to provide security to contractors, 
civilians, facilities, or convoys which support combat operations 
because of concerns regarding the status of security personnel under 
the law of international armed conflict. This body of law considers 
contractors who deploy with the force generally to be noncombatant 
civilians accompanying the force who may not take a direct part in 
hostilities. CENTCOM is concerned that using armed private security 
employees to protect clearly military activities would risk a change in 
status for these contractors from noncombatants to illegal combatants. 
Thus, the private security employees could lose the protections 
otherwise granted contractors accompanying the force under 
international law. 

At the time we published our report, DOD was in the process of 
establishing its first departmentwide policy on the military's security 
responsibilities for contractor personnel. The draft directive and 
instruction specify that the military shall develop a security plan for 
protection of contractor personnel and the contracting officer shall 
include in the contract the level of protection to be provided to 
contractor personnel. In appropriate cases, the combatant commander 
shall provide security through military means, commensurate with 
security provided DOD civilians. In May 2005, DOD also issued a new 
standard contract clause in the Defense Federal Acquisition Regulation 
Supplement (DFARS), to be included in all DOD contracts involving 
support to deployed forces stating that the Combatant Commander (for 
example, the CENTCOM Commander) will develop a security plan to provide 
protection, through military means, of contractor personnel engaged in 
the theater of operations unless the terms of the contract place the 
responsibility with another party.[Footnote 7] Prior to the issuance of 
the new contract clause, the Army's policy expressly required Army 
commanders to provide security for deployed contractors, while the Air 
Force's policy gave the Air Force the option of whether or not to 
provide force protection to Air Force contractors. It is important to 
note, however, that the proposed DOD departmentwide policy, procedures 
and standard contract clause do not cover non-DOD government 
contractors who may be in a military theater of operations. As 
discussed in the following, these contractors are responsible for 
providing their own security.[Footnote 8]

Civilian U.S. Government Agencies Provide for Their Own Security in 
Iraq: 

The State Department is responsible for the security of most of the 
executive-branch U.S. Government employees located in Iraq.[Footnote 9] 
According to the President's Letter of Instruction, the U.S. 
Ambassador, as Chief of Mission, is tasked by the President with full 
responsibility for the safety of all United States government personnel 
on official duty abroad except those under the security protection of a 
combatant commander or on the staff of an international organization. 
The embassy's Regional Security Officer is the Chief of Mission's focal 
point for security issues and as such establishes specific security 
policies and procedures for all executive branch personnel who fall 
under the Chief of Mission's security responsibility. 

In June 2004, representatives[Footnote 10] from the Department of State 
and DOD signed two memoranda of agreement to clarify each department's 
security responsibilities in Iraq. Among other things the agreements 
specify that: 

* In general, the Chief of Mission is responsible for the physical 
security, equipment, and personnel protective services for U.S. Mission 
Iraq;[Footnote 11]

* The Commander, CENTCOM is responsible for providing for the security 
of the International Zone as well as regional embassy branch offices 
throughout Iraq;

* Military capabilities may be requested by the Chief of Mission to 
provide physical security, equipment, and personal protective services 
only when security requirements exceed available Marine Security Guard 
Detachment, Department of State Diplomatic Security Service, and 
Department of State contracted security support capabilities;

* U.S. forces will provide force protection and Quick Reaction Force 
support outside the International Zone, to the extent possible, for 
Embassy personnel and activities; and: 

* The Ambassador has security responsibility for DOD personnel under 
the authority of the Chief of Mission. This includes the Marine 
Security Detachment and personnel working for the PCO. 

In Iraq, the State Department, USAID, the U.S. Army Corps of Engineers, 
and the CPA[Footnote 12] contracted with commercial firms to provide 
security. Our review of six agency-awarded security contracts, awarded 
between August 2003 and May 2004, showed that as of December 31, 2004, 
the agencies had obligated nearly $456 million on these contracts. In 
turn, the private security providers had billed the agencies about $315 
million by that date for providing various services, including personal 
security details; security guards; communications; and security 
management. The companies providing security for U.S. government 
agencies may be U.S. or foreign. For example, while USAID contracted 
with a U.S. firm, the U.S. Army Corps of Engineers and the PCO are 
using British companies to meet their security requirements. Security 
for the Ambassador is provided by a U.S. company, and only U.S. 
citizens are used to provide protection. 

Security providers who provide security for executive branch employees 
follow the procedures and policies established by the Regional Security 
Officer. For example, one security provider told us that the Regional 
Security Officer recently increased the number of cars required for 
moving people within Iraq. The provider's representative told us that 
they were obligated to comply with the Regional Security Officer's 
instructions even though the contract was not awarded by the State 
Department and the company does not provide security for State 
Department personnel. 

Contractors Rebuilding Iraq Obtained Their Own Security with Little 
Assistance from the Agencies: 

Contractors engaged in reconstruction efforts were generally required 
to provide for their own security, and they have done so by awarding 
subcontracts to private security providers. Contractors did not 
anticipate the level of violence eventually encountered in Iraq and 
found themselves needing to quickly obtain security for their 
personnel, lodgings, and work sites. As of December 31, 2004, our 
review of 15 reconstruction contracts for which we had data found that 
the contractors had obligated more than $310 million on security 
subcontracts, and in turn, the security providers had billed the 
contractors more than $287 million. The contractors' efforts to obtain 
suitable security providers met with mixed results, as many 
subsequently found that their security provider could not meet their 
needs. Overall, we found that contractors replaced their security 
providers on five of the eight reconstruction contracts awarded in 2003 
that we reviewed.[Footnote 13] This was attributable, in part, to the 
contractors' need to acquire security services quickly, their lack of 
knowledge of the security market and potential security providers 
available for the type of security services required for Iraq, and the 
absence of useful agency guidance. Information reflected in the 
agencies' own contracts for security, such as training and weapons 
qualifications requirements, could have assisted the contractors in 
identifying potential criteria for evaluating security providers and in 
structuring their subcontracts. 

Agency officials expected that the post-conflict environment in Iraq 
would be relatively benign and would allow for the almost immediate 
beginning of reconstruction efforts. During a discussion with DOD we 
were told that this expectation was based on determinations made at the 
most senior levels of the executive branch and the contracting 
officials were bound to reflect that expectation in their requests for 
proposals. Consequently, they made few or no plans for any other 
condition. Reconstruction contractors shared this perspective, relying 
upon the language in the agency requests for proposals and the comments 
of agency representatives at pre-proposal and other meetings. Our 
discussions with contractor officials found that they anticipated 
providing for only a minimal level of security under their contracts, 
such as hiring guards to prevent theft and looting at residential and 
work sites. In one case, the contractor expected that the military 
would provide security for its personnel. 

Our review of the agencies' request for proposals and other documents 
found that they were consistent with this expectation. For example, our 
review of five contracts awarded by late July 2003, including four 
awarded by USAID and one awarded by the U.S. Army Corps of Engineers, 
found that: 

* USAID's requests for proposals instructed the contractors that work 
was to begin only when a permissive environment existed. Contractors 
were given little guidance concerning security for their personnel and 
facilities and were not asked to estimate security costs as part of 
their proposals. 

* The U.S. Army Corps of Engineers' request for proposal noted that the 
military was expected to provide security for the contractor and, thus, 
the contractor was not required to propose any security costs. 

According to agency and contractor officials, the Iraqi security 
environment began to deteriorate by June 2003, although two contractors 
noted that the bombing of the United Nations compound in August 2003 
made it apparent that the insurgency was beginning to target 
nonmilitary targets (see figure 2). 

Figure 2: Incidence of Attacks against Civilians and Infrastructure 
Targets between June 2003 and April 2005: 

[See PDF for image] 

[End of figure] 

Contractor officials told us that as the security environment worsened 
they unexpectedly found themselves in immediate need of enhanced 
security services. These officials told us that they received little 
guidance from the agencies relative to possible security providers. We 
found that the contractors' efforts to obtain security providers often 
met with mixed results. For example: 

* One contractor, awarded a contract by the U.S. Army Corps of 
Engineers, expected that the U.S. military would provide security for 
its personnel. That contractor expressed concern, however, that the 
military protection being provided was insufficient to ensure its 
employees' safety and to allow for the performance of its mission and 
subsequently stopped work at one of its locations. In June 2003, the 
Army finally told the contractor that it did not have adequate forces 
to continue to provide security as promised, and advised the contractor 
to acquire its own security. Following a limited competition,[Footnote 
14] the contractor awarded a subcontract to a security provider in June 
2003. In this case, the contractor has been satisfied with the services 
provided and retained the security provider when the contractor was 
subsequently awarded another reconstruction contract in June 2004. 

* One USAID reconstruction contractor told us it quickly awarded a non- 
competitive subcontract to a security provider in July 2003. Within 
three months, the security company notified the reconstruction 
contractor that it was pulling its employees out of the country. As a 
former prisoner-transport service firm trying to expand into the 
protective services area, it discovered it lacked sufficient capacity 
to fulfill its contract requirements in Iraq. The reconstruction 
contractor subsequently conducted a competition among security 
providers already operating in Iraq to meet its needs. 

* Another reconstruction contractor initially hired a security service 
provider in October 2003. A contractor official stated that it soon 
became apparent that the security provider did not have the capacity to 
meet its security needs. As a result, the contractor awarded another 
subcontract, on a sole-source basis, to a security provider to augment 
the security services provided to its personnel. 

* Three of the reconstruction contractors we reviewed hired a newly 
established security provider company that was marketing itself in Iraq 
in mid-to late 2003. Officials representing one contractor told us that 
the provider was the only known provider capable of meeting their 
needs; officials for another contractor told us that they selected the 
provider based, in part, on its reputation. Each of the contractors, 
however, for various reasons, replaced the security provider. 
Subsequently, this security provider has been suspended from receiving 
further government contracts due to allegations of fraudulent billing 
practices. 

Overall, we found that five of the eight reconstruction contractors 
that were awarded contracts in 2003 that we reviewed replaced their 
initial or second security provider with another company, while in 
other cases, the contractors needed to augment the security services 
provided by their initial provider. As shown in figure 3, two 
contractors have awarded up to four contracts for security services. 

Figure 3: Number of Security Providers Employed on Reconstruction 
Contracts Awarded in 2003 and Reviewed by GAO: 

[See PDF for image] 

[End of figure] 

Contractor officials attributed this turnover to various factors, 
including the urgent need to obtain security, the increasing threat 
level, their lack of knowledge of potential sources and the security 
market, and the absence of useful agency guidance. In this latter 
regard, the detailed standards and requirements in their own agency 
security contracts may have provided useful assistance to 
reconstruction contractors in identifying potential criteria for 
evaluating security providers and in structuring their subcontracts. 
For example, the USAID security services contract, awarded in August 
2003, contained: 

* a detailed and required organization structure to be used by the 
contractor, with titles, duties and responsibilities of various levels 
of security providers specified;

* requirements for background checks on potential employees and 
provisions for agency approval and acceptance of those employees;

* detailed standards of conduct for contractor employees;

* language, health, and training requirements;

* weapons capability requirements; and: 

* instructions regarding providing armored vehicles.[Footnote 15]

Our review of five other agency security contracts awarded directly to 
private security providers from December 2003 through May 2004 for the 
protection of agency personnel in Iraq found that, to varying degrees, 
most of the cited areas were addressed. Conversely, our review of the 
subcontracts awarded by the reconstruction contractors to their 
security providers generally contained far less information. 

According to most contractor officials with whom we spoke, information 
similar to that included in the agency's contracts would have assisted 
them in defining their security needs and structuring their security 
subcontracts. Some contractor officials also noted that agency 
assistance with identifying and vetting potential security provider 
companies would have been very useful or would be useful in future 
similar situations. They discussed the possibility of a qualified 
vendors list, or, if time permitted, the establishment of a multiple 
award schedule of qualified security providers, which contractors could 
use to quickly contract for their security needs through competitive 
task orders.[Footnote 16]

Agency officials believed that information regarding personnel 
qualifications and competent providers could be made available to 
contractor personnel in future efforts, especially if the information 
was provided for the contractor's consideration, rather than being a 
contract requirement. For example, one agency official noted that his 
agency's requests for proposals for security services are publicly 
available. Some officials believed that making information a 
contractual requirement would infringe upon the contractor's privity of 
contract with its subcontractors and might pose a potential government 
liability should such requirements later prove inadequate. Other 
officials believed that it should be the contractor's responsibility to 
research and decide for itself its own needs and sources of security 
services without assistance from the government. 

DOD Provides Emergency Quick Reaction Forces and Other Services to 
Contractors in Iraq: 

According to U.S. officials and contractor personnel we interviewed, 
U.S. military forces in Iraq will provide, when assets are available, 
emergency quick reaction forces to assist contractors who are engaged 
in hostile fire situations. The military is also providing other 
support services to U.S. government-funded contractors, to include 
private security providers. For example, U.S. military forces will 
assist with the recovery and return of contractor personnel who have 
been kidnapped or held hostage. Additionally, the U.S. military also 
provides medical services above the primary care level to contractors. 
These services include hospitalization, as well as laboratory and 
pharmaceutical services, dental services, and evacuation services, 
should the patient require them. In addition, the military is providing 
medical support to private citizens, third country nationals, and 
foreign nationals when necessary to save life, limb, or eye-sight. 
Finally, contractors are entitled to receive mortuary affairs services. 
DOD is providing these services pursuant to authorities under Title 10, 
United States Code, as well as a variety of DOD Directives, a June 2004 
support agreement between DOD and the Department of State, National 
Security Presidential Directive 36 (which governs the operations of the 
U.S. government in Iraq) and specific contract provisions. 

While the Relationship between Security Providers and the Military Has 
Improved, Actions Should Be Taken to Further Improve Effectiveness: 

The military and the private security providers in Iraq have an 
evolving relationship based on cooperation and coordination of 
activities and the desire to work from a common operating picture. 
However, U.S. forces in Iraq do not have a command and control 
relationship with private security providers or their employees. 
Initially, coordination between the military and private security 
providers was informal. However, since the advent of the Reconstruction 
Operations Center in October 2004, coordination has evolved into a 
structured and formalized process. While contractors and the military 
agree that coordination has improved, some problems remain. First, 
private security providers continue to report incidents between 
themselves and the military when approaching military convoys and 
checkpoints. Second, military units may not have a clear understanding 
of the role of contractors, including private security providers, in 
Iraq or of the implications of having private security providers in the 
battle space. 

U.S. Forces Do Not Have Command and Control over Private Security 
Providers Working In Iraq: 

According to CENTCOM officials and military personnel who have been 
stationed in Iraq, U.S. military forces in Iraq do not have a command 
and control relationship with private security providers or their 
employees. According to a DOD report[Footnote 17] on private security 
providers working in Iraq, U.S. military forces in Iraq have no command 
and control over private security providers because neither the 
combatant commander nor his forces have a contractual relationship with 
the security providers.[Footnote 18] Instead, military and security 
provider personnel who served in Iraq described a relationship of 
informal coordination, where the military and private security 
providers meet periodically to share information and coordinate and 
resolve conflicts in operations. 

Despite a lack of command and control over private security providers 
and their employees, commanders always have authority over contractor 
personnel, including private security provider personnel, when they 
enter a U.S. military installation. Commanders are considered to have 
inherent authority to protect the health and safety, welfare, and 
discipline of their troops and installation.[Footnote 19] This 
authority allows the commander to establish the rules and regulations 
in effect at each installation. For example, an installation commander 
may determine traffic regulations, weapons policies, force protection 
procedures, and visitor escort policies. Contractors, including private 
security providers, who fail to follow the military's rules and 
regulations while they are on the installation can be prohibited from 
entering the installation and using its facilities. As an example, one 
Army official told us that his unit had barred some private security 
employees from using the unit's dining facilities because the private 
security employees insisted on carrying loaded weapons into the dining 
facility. The unit did not allow loaded weapons in the dining facility 
for safety reasons. 

Coordination Between the Military and Private Security Providers in 
Iraq Has Evolved Since the Beginning of Reconstruction: 

Coordination between the military and the private security providers 
has evolved from an informal coordination based on personal 
relationships to a more structured, although voluntary, mechanism 
established by the Project and Contracting Office (PCO). According to 
military officials, contractors, and security providers coordination 
between the military and security providers was initially done 
informally. When a private security provider arrived in a unit's area 
of operation, the security provider would try to meet with key 
officials of the unit and establish a relationship. A private security 
provider we spoke with told us that the results of this informal 
coordination varied based on the individual personalities of the 
military and provider personnel. According to some security providers, 
although many military commanders were very interested in establishing 
a relationship with the security providers, others were not. 
Additionally, coordination was inconsistent. For example, one officer 
who had served with the 4th Infantry Division in Iraq told us that 
coordination in his area was mixed. According to the officer, some 
security providers, such as the one providing security for the Iraqi 
currency exchange program, would always coordinate with the division 
before moving through the division's area of operations but another 
contractor rarely coordinated with the division. This is similar to 
information we obtained from officials of the 2nd Armored Cavalry 
Regiment. One officer from one of the regiment's squadrons told us that 
contractors that worked within the unit's area of operation generally 
coordinated with the regiment while those who were traveling in or 
through his unit's area of operation generally did not coordinate with 
the regiment. He also told us that on one occasion security providers 
escorted the CPA administrator into their area of operation without the 
squadron's knowledge and while the squadron was conducting an operation 
in Najaf. According to the officer, a fire fight broke out at the CPA 
administrator's location and the squadron had to send troops to rescue 
the CPA administrator and his party. This had a significant impact on 
its operation, according to the officer. Another officer, who served on 
the Combined Joint Task Force-7[Footnote 20] staff, told of instances 
when contractors died and the division commander did not know that the 
contractors were operating in his area of operations until he was 
instructed to recover the bodies. Finally, according to a military 
officer serving with the PCO at the time of our review, the genesis of 
the Reconstruction Operations Center (ROC) (discussed next) was the 
need to improve coordination between contractors and the major 
subordinate commanders. 

The ROC serves as the interface between the military and the 
contractors in Iraq and is located within the PCO. In May 2004, the 
Army awarded a contract to a private security provider to provide 
security for PCO personnel and to operate the ROC, shown in figure 4. 
The goal of the ROC, which became operational in October 2004, is to 
provide situational awareness, develop a common operating picture for 
contractors and the military, and facilitate coordination between the 
military and contractors. 

Figure 4: National Reconstruction Operations Center, Baghdad, Iraq: 

[See PDF for image] 

[End of figure] 

The national ROC is located in Baghdad and six regional centers are co- 
located with the military's major subordinate commands, to enhance 
coordination between the military and the private security providers. 
Figure 5 shows the locations of the regional centers. 

Figure 5: Locations of the Regional Reconstruction Operations Centers 
in Iraq: 

[See PDF for image] 

[End of figure] 

Participation in the ROC is voluntary (although some DOD officials told 
us that participation should be mandatory) and is open (at no cost) to 
all U.S. government agencies, contractors, and nongovernmental 
organizations operating in Iraq. The ROC and the regional centers are 
staffed with a combination of military, U.S. government civilian, and 
contractor personnel who provide a number of services for private 
security providers and others. Among the services the ROC provides are: 

* Intelligence information. The military provides unclassified 
intelligence information to the ROC for dissemination to contractors. 
Intelligence information is updated daily and information is available 
on a password-protected Web site and through daily intelligence 
briefings. In addition, contractors can request specific threat 
assessments on future building sites and planned vehicle routes. 
Contractors use the ROC to pass on information about incidents and 
threats to coalition forces as well. 

* Military assistance. The ROC serves as the 911 for contractors who 
need military assistance. Contractors who need assistance contact 
either the national ROC or the regional ROCs and ROC personnel contact 
the closest military unit and ask it to provide assistance. Assistance, 
such as a quick reaction force or medical assistance, is provided if 
military assets are available. Security providers we spoke with said 
that they rarely call for a quick reaction force because incidents with 
insurgents are usually over within a matter of minutes but on some 
occasions the quick reaction forces have proved to be very helpful. For 
example, one after action report described an incident in February 2005 
in which a private security team was ambushed by 20 insurgents and 
attacked by small arms fire and three rocket-propelled grenades. The 
contractors contacted both the regional ROC in Mosul and the national 
ROC in Baghdad. The military responded with fixed wing assets within 15 
minutes and a rotary wing quick reaction force escorted the team safely 
back to Mosul. Contractors more frequently receive medical assistance 
from the military and described the assistance they received as 
excellent. Figure 6 depicts the process used to request assistance 
through the ROC or the regional ROCs. 

Figure 6: Process for Requesting Assistance through the ROC: 

[See PDF for image] 

[End of figure] 

* Improved communications. Communications with the military can be 
difficult in Iraq because of a lack of radio interoperability between 
the military and contractors. The ROC facilitates communications 
between the military and contractors. First, the ROC provides contact 
numbers for the military to private security providers to use when they 
are moving around in Iraq. Second, the ROC will ensure that the 
military is aware of contractor movements. Security providers who so 
choose can provide the ROC with information on convoy movements, which 
the ROC will forward to the appropriate military commands. Third, the 
ROC can contact the military to provide assistance to contractors, and 
finally, the ROC can track convoys through a real-time tracking system 
that uses the global positioning system and includes a communications 
link with the ROC if assistance is needed. 

Some Coordination Problems Remain between Private Security Providers 
and the U.S. Military: 

While security providers, reconstruction contractors, and military 
representatives of the PCO believe that the ROC has improved 
coordination on the complex battle space in Iraq, both the private 
security providers and the military believe that several coordination 
issues remain to be resolved. Security providers and military officials 
expressed continuing concern about incidents between security providers 
and the military when approaching military convoys and checkpoints and 
the need for a better understanding of the complex battle space by both 
private security providers and the military. 

Blue on White Incidents Are of Major Concern to the Military and 
Private Security Providers: 

One of the coordination issues that contractors and the military 
continued to be concerned about is blue on white violence. Blue on 
white violence is the term used by contractors and the military to 
describe situations when the military fires at friendly forces (such as 
contractors) or, as happens less frequently, when private security 
employees fire at military forces. An analysis of incident reports 
completed by the ROC indicates that these incidents happen most 
frequently when contractors encounter a military checkpoint or a 
military convoy. Private security providers have told us that they are 
fired upon by U.S. forces so frequently that incident reports are not 
always filed with the ROC. According to some incident reports filed 
with the ROC, some contractors believe that U.S. forces have fired on 
private security provider vehicles without provocation. For example, 
one security company official reported that his convoy was traveling on 
a route in Iraq when a U.S. military convoy approached. According to 
the report, the security convoy identified itself using generally 
recognized identification procedures and pulled off the road to allow 
the military convoy to pass. After about half of the 20-vehicle convoy 
had passed, a gunner in the military convoy began firing at the 
security convoy. According to the after incident report filed with the 
ROC, no injuries or damage resulted from this incident. A similar 
incident happened on the road from the International Zone to the 
Baghdad airport. As in the previous incident, part of a U.S. military 
convoy passed the private security convoy without incident when a 
gunner in the fourth vehicle of the convoy began to fire at the lead 
vehicle in the private security convoy. After this incident, the 
private security team leader received an apology from the servicemember 
who had fired on the security company vehicle. As a result of this 
incident, the company's vehicle was rendered unserviceable. 

In another incident report, a private security provider documented an 
incident at a U.S. military checkpoint. According to the report, a 
security convoy had slowed to approach the checkpoint, and was then 
fired on by a U.S. soldier. The report went on to say that no verbal or 
hand warnings were given and no reason was given for the shooting. 
According to representatives of the security providers and the former 
director of security for the PCO, many of these incidents happen 
because of the military's concerns over insurgents using vehicle-borne 
improvised explosive devices, as well as the inexperience of some U.S. 
troops. 

Reducing the number of blue on white incidents is a high priority for 
the U.S. military, the PCO, private security providers, and the Private 
Security Company Association of Iraq, a Baghdad--based association that 
works with both the U.S. government and the Iraqi government to resolve 
issues related to private security providers. In late December 2004, in 
an effort to reduce the number of blue on white incidents, the Multi 
National Corps-Iraq (MNC-I) issued an order to major subordinate 
commands in Iraq establishing procedures for private security providers 
to use when approaching military convoys and military checkpoints. MNC- 
I directed the subordinate commanders to implement the procedures 
detailed in the order and to educate all private security providers and 
military on the procedures. Among the procedures were (1) a prohibition 
on nontactical vehicles (such as the vehicles used by private security 
providers) passing moving military convoys; (2) a requirement that 
warning shots, when fired, be aimed away from a vehicle and demonstrate 
a clear intention to do harm if directions are not obeyed; and (3) a 
requirement that vehicles should maintain a distance of a least 200 
meters from a military convoy. 

In early 2005, MNC-I completed an analysis of friendly-fire incidents 
that occurred between November 1, 2004 and January 25, 2005 to 
determine the top 10 lessons learned from such incidents. Among the top 
10 lessons was the need for U.S. forces to comply with the rules of 
engagement, which require that U.S. troops determine that a person's 
intent is hostile before the military uses deadly force. The other 
lessons learned were similar to the procedures included in the order. 
According to a PCO official, the top 10 list was provided to the 
private security providers. 

Despite the MNC-I order, blue on white incidents continue to occur and 
security providers remain concerned about the frequency of the attacks. 
In the 5 months (January to May 2005) since the order was issued, the 
ROC has received reports on 20 blue on white incidents and the number 
of actual incidents is likely to be higher since, as we noted 
previously, some providers no longer report these types of incidents. 
Data on the number of incidents for the 5 months before the order was 
issued was not available because the ROC did not start collecting 
information on blue on white incidents until November 2004. A ROC 
official noted that blue on white incidents had decreased in April 
2005. He believed that the reduction was due, in part, to the adoption 
of the procedures outlined in the order. However, he also noted that 
the number of incidents could increase again as troops rotate in and 
out of Iraq or if terrorist attacks increase. 

Units Do Not Receive Specific Training or Guidance about Working with 
Private Security Providers before Deploying: 

Military units that deployed to Iraq received no guidance or training 
regarding the relationship between private security providers and the 
military prior to deploying. Representatives from the 2nd Armored 
Cavalry Regiment, the 82nd Airborne Division, and the 1st Marine 
Expeditionary Force all told us that they received no guidance from 
either CENTCOM or Combined Joint Task Force-7 and that their units had 
not developed any written procedures for dealing with private security 
providers. Furthermore, a representative of a unit that is preparing to 
deploy, the 101st Airborne Division, told us that it had not received 
any guidance on how to work with private security providers nor had it 
been directed to include information on private security providers, the 
PCO, or the ROC in its pre-deployment training, even though the 101st 
will be co-located with a regional ROC. To highlight the lack of 
training and guidance, representatives from one unit told us that they 
did not know there were private security providers in their battle 
space until the providers began calling for assistance. They also noted 
that any information about who would be in the battle space and the 
support the military should be providing would be useful. 

Several private security providers we spoke with told us that they 
believed it would be helpful if U.S. forces who deployed to Iraq 
received information on private security providers in Iraq. For 
example, the providers believed that U.S. troops needed more 
information on why private security providers are in Iraq, the impact 
of having private security providers there, and the operational styles 
of the private security providers. Army officials we spoke with 
believed that this type of information would be helpful and suggested 
that private security providers could use additional information about 
working with the U.S. military as well. 

Agencies Have Limited Capabilities to Assess the Cost Impact of Using 
Private Security Providers: 

Despite the significant role played by private security providers in 
enabling reconstruction efforts to proceed, neither the Department of 
State, DOD, nor USAID has complete data on the cost associated with 
using private security providers. For example, the quarterly report 
submitted by the Department of State to Congress on the status of 
reconstruction projects and funding does not provide information on 
security costs that are incurred under reconstruction contracts. Even 
at the contract level, the agencies generally had varying degrees of 
information on the costs associated with private security providers. On 
15 reconstruction contracts we found that the cost to obtain private 
security providers and security-related equipment at the reconstruction 
contract level can be considerable, as it accounted for 15 percent or 
more on 8 of the 15 contracts we reviewed; on only 4 of those 8 
contracts, however, did the agencies formally track security costs 
under a separate task order or contract line item. Agency and 
contractor officials acknowledged that security costs had diverted 
planned reconstruction resources and led to canceling or reducing the 
scope of certain reconstruction projects, though they also noted that 
other factors have affected reconstruction projects. 

Agencies Do Not Comprehensively Track Costs Associated with Private 
Security Providers: 

The Secretary of State is responsible for submitting a quarterly report 
to Congress that outlines the current status of programs, initiatives, 
and funds dedicated to the Iraq reconstruction efforts.[Footnote 21] 
These quarterly reports provide information at the project and sector 
level--such as oil or electricity--and acknowledge the challenges and 
costs associated with the security environment in Iraq. For example, in 
its April 2005 report, the State Department noted that nearly $1.3 
billion in funding has been, or will be, used in part to (1) cover 
unanticipated post-battle reconstruction costs, (2) cover indirect cost 
increases of contractors operating on cost-plus contracts that allow 
them to continue billing even during delays, and (3) account for 
increased security costs. The reports, however, do not identify the 
magnitude or impact of the costs associated with security providers on 
reconstruction efforts or available funding. Discussions with DOD and 
USAID personnel found that the financial and management information 
systems used to help prepare the report are not able to track costs 
incurred by reconstruction contractors for security services. Agency 
officials noted that to obtain such information would currently require 
the agencies to request such information from the contractors and 
manually prepare the information. Agency officials noted they have made 
inquiries on an ad hoc basis in the past, but cautioned that such 
requests can be burdensome for both the contractors and agency 
officials. 

Contractor officials acknowledge that the cost of private security 
services and security-related equipment, such as armored vehicles, has 
exceeded what they originally envisioned. In some cases, increased 
security costs resulted in reducing or canceling the scope of some 
reconstruction projects. For example: 

* Contractor officials noted they were originally tasked to 
rehabilitate 23 electrical substations and had conducted site surveys 
and procured equipment for all 23 substations. According to contractor 
officials, however, the U.S. Army Corps of Engineers concluded that 
securing 14 of the substations would not be cost effective, and 
therefore reduced the scope to 9 substations. Contractor officials 
indicated that the equipment and materials procured for the 14 
substations have been or will be turned over to the Iraqi Ministry of 
Electricity. 

* In February 2004, USAID obligated an additional $33 million on one of 
its contracts to pay for unanticipated increases in security costs that 
left it short of funds to pay for construction oversight and quality 
assurance, as well as fund administrative costs. 

* In March 2005, USAID cancelled two electrical power generation- 
related task orders totaling nearly $15 million to help pay for 
increased security costs being incurred at another power generation 
project in southern Baghdad. 

Contractor officials noted, however, that other factors also affected 
reconstruction progress, such as changes in priorities or higher 
material costs. For example, officials at one contractor noted that 
security had not been a significant factor delaying their work; rather, 
they pointed to delays in reviewing and approving projects and slower 
than anticipated release of funding. Similarly, USAID officials noted 
that, among other materials, the cost of concrete is significantly 
higher than anticipated, driving up the cost of many reconstruction 
projects. 

We found that at the contract level, agency personnel did not have 
consistent insight into security costs and their impact on 
reconstruction efforts. For example, agencies often did not require 
prospective bidders to propose meaningful security costs as part of 
their contract cost proposal nor require contractors to prepare a 
baseline security cost estimate at the time of contract award. Many of 
the contracts, including those awarded after the security environment 
began to deteriorate, were indefinite delivery contracts, in which the 
work to be accomplished was often described in general terms, with the 
specific work to be accomplished determined as task orders are issued. 
In several cases, agency personnel provided prospective contractors a 
sample task order to use in preparing their proposals. While the 
contractors' cost and technical proposals described how they would 
approach security issues and provided an associated cost estimate, such 
estimates were only for evaluation purposes and did not reflect 
meaningful security costs. Overall, in only 3 of the 16 contracts we 
reviewed did contractors prepare an initial security cost estimate for 
the entire contract. 

Further, we found that in only 7 of the 16 contracts did the 
contractors regularly provide security-related cost information in 
either monthly progress reports or in separate contract line items or 
task orders. The level of information and insight provided varied 
greatly depending on the approach taken. For example, on three 
contracts, the contractor provided security cost-related information 
for each of its projects, but did not provide information at the total 
contract level. In one contract, security costs were reported on both 
the task order and contract level. In one contract, the security cost 
information was reported under a separate contract line item with other 
expenses, and visibility was more limited. In the remaining two 
contracts, the agency established separate task orders specifically to 
track security-related expenses at the contract level. 

In 15 of the 16 reconstruction contracts that we reviewed, we were able 
to obtain data on the costs of acquiring private security services and 
related security equipment[Footnote 22] by reviewing invoices that 
private security providers and security equipment providers submitted 
to contractors. Our analysis of this data found that at the 
reconstruction contract level there was considerable variation in 
estimated security costs as a percentage of total contract billings 
(see figure 7).[Footnote 23] Eight of the 15 contracts had security 
costs that exceeded 15 percent of total contract billings as of 
December 31, 2004; on 4 contracts, the percentage of contract billings 
accounted for by the cost of security subcontractors was more than 25 
percent.[Footnote 24] On only 2 of those 8 contracts in which security 
costs exceeded 15 percent did agency personnel require the contractors 
to formally track and report security costs under a separate task order 
or contract line item. Though not required, one contractor reported 
incurred security costs on two contracts on its own initiative. 

Figure 7: Percentage of Total Contract Billings Accounted for by 
Security Subcontractor Expenses as of December 31, 2004: 

[See PDF for image] 

[End of figure] 

While our analysis indicates that at the reconstruction contract level 
the cost of obtaining private security services can account for a 
significant percentage of the contract's total cost, it does not 
reflect total private security costs. For example, reconstruction 
contractors did not always specifically track security-related costs 
incurred by their subcontractors or lower tier suppliers. According to 
contractor officials, in seven of the sixteen reconstruction contracts 
that we reviewed, at least one of their subcontractors provided for 
their own private security; in five of those seven contracts, all of 
the subcontractors were required to provide for their own 
security.[Footnote 25] The cost for a subcontractor to obtain private 
security services can be considerable. For example, in one case, the 
costs incurred by a major subcontractor amounted to almost $10 million, 
or nearly one-third of what the reconstruction contractor was paying 
for security. In another case, the costs incurred by a major 
subcontractor exceeded $3.5 million, or about 8 percent of what the 
reconstruction contractor was paying for security. 

Our analysis and discussions with agency and contractor officials 
identified several factors that influenced security costs, including 
(1) the nature and location of the work; (2) the type of security 
required and the security approach taken; and (3) the degree to which 
the military provided the contractor security services. For example, 
projects that took place in a fixed, static location were generally 
less expensive to secure than a project that extended over a large 
geographic location, such as electrical transmission lines. In other 
cases, contractors relied on former military personnel or other highly- 
trained professionals to provide security to their employees. 
Conversely, some contractors made more extensive use of local Iraqi 
labor and employed less costly Iraqi security guards. Lastly, some 
contractors were able to make use of security provided by the U.S. 
military or coalition forces. For example, several contractors had 
facilities within or near U.S.-controlled locations, such as Baghdad's 
International Zone or on military bases, which reduced their need to 
obtain private security services. In another case, the contractor was 
provided a limited degree of protection by the U.S. Army. 

Agency and contractor officials had mixed opinions on the value of 
establishing separate reporting or tracking mechanisms. For example, 
some agency officials believed that having visibility into security- 
related costs enabled them to provide more effective contract 
oversight, and identify security cost trends and their impact on the 
project. Other officials noted that many factors affect the cost and 
progress of reconstruction efforts, including changes in planned 
funding or projects, material costs, and the inability to find 
qualified workers willing to work in Iraq. Consequently, they indicated 
that they generally try to manage the projects at a total project 
level, rather than by individual elements, such as security. For 
example, they noted that when reviewing project status reports with the 
contractors, they will question the contractors on the factors causing 
delays or cost increases. They were not certain that having specific 
insight into security costs would help them better manage or oversee 
their projects. Agency program and financial management officials noted 
that from a budgeting perspective, tracking security cost information 
could enable staff to provide better estimates of future funding 
requirements. 

Contractor officials generally indicated that establishing a separate 
task order or contract line item for security enabled them to more 
efficiently account for and bill security costs and to more accurately 
report reconstruction progress. For example, officials at one 
contractor noted that they often had several projects under way which 
required security. Prior to establishing a separate task order, the 
security provider would be required to allocate costs to each of the 
projects even though the security was provided for a given location, 
often resulting in lengthy and complex vouchers, higher potential for 
error, and increased administrative expenses. Once a separate task 
order was established, its security provider charged the costs incurred 
for providing security to the location, rather than each project, 
simplifying the billing and review process. Other contractor officials 
noted that the need to obtain security providers and security-related 
equipment often occurred during the early stages of the contract when 
the agencies had issued only a few task orders for specific 
reconstruction projects. Consequently, contractor officials told us 
they found themselves incurring considerable security-related expenses 
during the mobilization phase that had to be allocated to subsequent 
task orders, thereby increasing costs. These officials noted that 
allocating security costs to existing task orders would have resulted 
in the task's cost exceeding the government's estimate. Contractor 
officials indicated that a separate task order for security would have 
enabled them to better explain to agency personnel the cost of the 
reconstruction effort and the impact of security costs and enable them 
to account for and bill security costs more efficiently. 

Expanded Use of Private Security Providers Does Not Appear to Be 
Increasing Attrition among Military Personnel: 

Data from the Defense Manpower Data Center (DMDC)[Footnote 26] show 
that in fiscal year 2004, the attrition rates for the occupational 
specialties preferred by private security providers returned to the 
same or slightly lower levels than those seen prior to the institution 
of occupational stop losses[Footnote 27] in September 2001 despite the 
increased use of private security providers. Private security providers 
working in Iraq are hiring former servicemembers with a variety of 
skills, including servicemembers with military police or Special 
Operations experience. Military officials told us that they believe 
that servicemembers with these skills are separating from the military 
earlier than in prior years. We are unable to determine from this data 
whether servicemembers are leaving the military for positions with 
private security providers as the data can only demonstrate trends in 
attrition, not explain why people are leaving the military or what they 
intend to do after leaving the military. 

Private security providers prefer to hire former military members, 
particularly Special Operations forces, for their unique skills and 
experience. Servicemembers with Special Operations background are often 
hired to fill key positions, such as security advisors and project 
managers, and to provide personal security to high ranking government 
officials. These positions may pay as much as $33,000 a month. Other 
servicemembers may be hired to provide security to civilians in vehicle 
convoys with salaries between $12,000 and $13,000 per month, while some 
may be hired to provide site security for buildings and construction 
projects at somewhat lower salaries. For the most part, employees only 
receive these salaries when they are working in Iraq, typically 2 to 3 
months at a time. All of the U.S.-based private security providers we 
spoke with told us that they do not actively recruit current 
servicemembers; however, they do recruit at military-sponsored 
transition job fairs, through the Internet, and with advertisements in 
military magazines and newspapers. 

Officials from the Special Operations Command and Army Military Police 
Believe Attrition Is Increasing Due, in Part, to Security-Related Job 
Opportunities: 

Both Special Forces and military police personnel officials believe 
that attrition is increasing in their military specialties. For 
example, during a July 2004 hearing before the House Armed Services 
Committee, Subcommittee on Terrorism, Unconventional Threats and 
Capabilities, representatives from the U.S. Special Operations Command 
and the military services' Special Operations commands noted that the 
number of Special Forces enlisted personnel retiring at 20 years (the 
first time they are eligible) has been increasing due, in part, to the 
increased opportunities available in civilian government and with 
contractors. In addition, representatives of the Naval Special 
Operations Command and the Air Force Special Operations Command also 
noted that they were seeing increased attrition rates among those 
servicemembers with 8 to 12 years of service. According to these 
representatives, servicemembers leaving at this point in their careers 
are also leaving for opportunities with contractors. 

Army officials have also expressed concerns about attrition in the 
military police force. For example, officials from the military police 
personnel office at the Army's Human Resources Command told us that 
they have seen a significant number of senior noncommissioned officers 
leave the military police for positions with private security 
providers. These officials also told us they have seen the average 
length of service for colonels in the military police branch decrease 
from 28 to 25 years. Furthermore, in an e-mail provided by the Army's 
Human Resources Command, a senior noncommissioned officer at the 16TH 
Military Police Brigade noted that the brigade did not meet its 
reenlistment targets in fiscal year 2004. Finally, the Army Central 
Command's Provost Marshall in July 2004 told us that he had lost four 
of his eight senior noncommissioned officers to higher paying private 
security providers within the last year and was expecting to lose two 
more senior noncommissioned officers. He also noted that he had lost 
more than half of his company grade officers as well. 

Efforts are being taken by both the military police and Special Forces 
communities to address retention concerns. For example, the Army plans 
to double the size of its military police force from 15,500 to 30,000 
by 2006 and the Special Operations Command plans to increase its force 
size from 13,200 to 15,900 over the next 5 to 6 years. Increasing the 
size of the Army military police and Special Operations will decrease 
the high operational tempo[Footnote 28] and relieve some of the stress 
on military personnel, which these communities believe contributed to 
higher attrition. In addition, DOD recently began to offer reenlistment 
bonuses to Special Operations personnel with 19 or more years of 
experience which range from $8,000 to those who reenlist for one year 
to as much as $150,000 for those who reenlist for an additional 6 
years. 

Attrition Rates for 2004 Returned to Level Seen Prior to Stop Loss 
Issuance: 

While data from several sources indicate increased attrition in fiscal 
year 2004 compared to fiscal years 2002 and 2003 in the military skills 
sought by private security providers, these data also showed that 
attrition rates in fiscal year 2004 had returned to the levels seen in 
fiscal years 2000 and 2001, prior to the majority of the stop loss 
policies that have been instituted by the services at various times 
since September 2001. Table 1 shows the dates of occupational stop 
losses for each of the services. 

Table 1: Occupational Stop Loss Dates for the Military Services: 

Service: Army; 
Stop Loss Began: December 2001; 
Stop Loss Ended: November 2003[A]. 

Service: Navy; 
Stop Loss Began: September 2001; 
Stop Loss Ended: August 2002. 

Service: Air Force; 
Stop Loss Began: September 2001; 
Stop Loss Ended: June 2003. 

Service: Marine Corps; 
Stop Loss Began: January 2002; 
Stop Loss Ended: May 2003. 

Source: GAO from DOD data. 

[A] Although the Army terminated its occupational stop loss program, at 
the time we issued this report the Army had a unit stop loss program in 
effect. The Army's unit stop loss policy applies to soldiers in units 
preparing to deploy. It applies to all soldiers in a unit and prevents 
soldiers from leaving the Army within 90 days of their unit's 
deployment, during the unit's deployment, and 90 days after the unit 
has returned from its deployment. 

[End of table]

Each of the services added and released occupations from stop loss as 
the needs of the service dictated. For example, the Air Force placed 
all occupational specialties under a stop loss in September 2001 and 
then released a number of occupations from the stop loss in January and 
June 2002. As we noted, the Air Force ended all stop loss activities in 
June 2003. In the Army, Special Operations forces were placed under 
stop loss in December 2001 and were released from the stop loss in June 
2003, while enlisted servicemembers who served as military police were 
placed under stop loss in February 2002 and were released from the stop 
loss in July 2003. Army officers serving as military police were placed 
under the stop loss in February 2002 and were released from the stop 
loss in June 2003. 

Data obtained from DMDC on the military occupational specialties 
preferred by private security providers revealed that several of these 
specialties show increased attrition in fiscal year 2004 over the 
attrition rates in fiscal year 2003. These specialties include: 

* Air Force: Officer military police: 

* Army: Enlisted and Officer Infantry, military police, and Special 
Forces: 

* Marine Corps: Enlisted and Officer Infantry and military police: 

* Navy: Enlisted military police, Officer Special Forces, and Enlisted 
SEALs. 

For the specialties listed, the average attrition rates for each fiscal 
year are shown in figure 8. As seen in figure 8, the attrition rates 
for these specialties decreased in fiscal year 2002 and 2003 from their 
2000 and 2001 levels and showed an increase in attrition in fiscal year 
2004. These data also show that the levels of attrition seen in fiscal 
year 2004 were actually lower than those seen in fiscal years 2000 and 
2001. 

Figure 8: Average Attrition Rates for Military Occupational Specialties 
Preferred by Private Security Providers which Experienced Increased 
Attrition in Fiscal Year 2004: 

[See PDF for image] 

[End of figure] 

The decrease in attrition rates seen in fiscal years 2002 and 2003 as 
compared to the rates seen in fiscal years 2000 and 2001 reflect 
attrition patterns that are seen during stop losses. Service officials 
told us that stop loss policies affect attrition rates; they can 
temporarily delay separations and artificially decrease attrition rates 
for the year of the stop loss. Officials at the Army Human Resources 
Command also found that stop loss policies can also increase attrition 
rates for the year preceding the stop loss. For example, the Army saw 
increased separations in 2002 for military police colonels in 
anticipation of their occupation-specific stop loss. Given the impact 
of stop loss policies on attrition, data may not accurately convey the 
typical personnel losses that would have occurred had the stop loss not 
been in effect as people left the military both in anticipation of stop 
loss and after stop loss was lifted. Thus, we are unable to determine 
whether the increase in attrition rates in fiscal year 2004 was due to 
the lifting of the stop loss policy or true increases in military 
attrition. 

Figure 9 shows a pattern of decline in attrition rates during the stop 
loss period followed by a rebound for Army Special Forces in fiscal 
year 2004. Attrition rates for enlisted Army Special Forces were almost 
identical in fiscal years 2000 and 2001, and declined through 2003 
during the Army Special Forces specific stop loss, which was in effect 
from December 2001 to June 2003. However, after the stop loss was 
lifted, attrition rates for the enlisted Army Special Forces almost 
doubled from 6.5 percent in fiscal year 2003 to 12.9 percent in fiscal 
year 2004, a level which was about 25 percent higher than the fiscal 
year 2000 rate. Attrition rates for Army Special Forces officers also 
declined during the stop loss period and returned to just below the 
fiscal years 2000 and 2001 levels in fiscal year 2004. 

Figure 9: Army Special Forces Attrition Rates: 

[See PDF for image] 

[End of figure] 

The Special Operations Command also provided us with continuation rates 
calculated by DMDC for the Army, Navy, and Air Force Special Operations 
Commands. Continuation rates were calculated by determining which 
personnel remained on active duty from one year to the next and are an 
alternative method used to demonstrate retention and attrition. The 
continuation rates showed an increase in losses in 2004 for the Army 
Special Operations and Navy Special Warfare Commands senior 
noncommissioned officers, as well as Army Special Operations warrant 
officers. Similar to the DMDC data provided to us, these commands also 
saw a decrease in losses (or a decrease in attrition rates) in 2002 
after a stop loss was issued and, with the exception of the Navy 
Special Warfare warrant officers, an increase in losses (or an increase 
in attrition rates) after the stop loss was lifted. 

Additionally, as shown in figure 10, the continuation data for Army 
Enlisted Special Operations personnel with 14 through 19 years of 
service separated at only a slightly higher rate in 2004 than in the 
pre-stop loss years --fiscal years 2000 and 2001. In the July 2004 
hearing before the House Armed Services Committee, Subcommittee on 
Terrorism, Unconventional Threats and Capabilities, the Senior Enlisted 
Advisor for the United States Special Operations Command stated that 
the loss of these mature, operationally experienced personnel creates 
critical operational risk for the Special Forces. According to the 
Special Operations Command officials with whom we spoke, because the 
command is losing some of its most experienced personnel, younger less 
experienced servicemembers are being promoted to leadership positions 
more quickly than in the past. This need to rely on less experienced 
personnel has created some concerns for the command. 

Figure 10: Continuation Rates for Army Enlisted Special Operations 
Personnel with 14 through 19 Years of Service for Fiscal Years 2000 
through 2004: 

[See PDF for image] 

Note: Con't = continuation. 

[End of figure] 

Many Factors Influence the Decision to Separate from the Military: 

While available data indicate that attrition, in almost all of the 
military specialties favored by private security providers, has 
returned to pre-September 11, 2001 levels, the data do not indicate why 
personnel are leaving the military and what they are doing after they 
leave. Exit surveys conducted with servicemembers leaving the military 
do not include questions on the servicemembers' future employment 
plans. Officials at the Army Human Resources Command told us that after 
September 11, 2001, the opportunities for employment in the security 
field became more widespread as government agencies as well as private 
companies and organizations recognized the need to improve their 
security. These officials as well as officials from the Special 
Operations Command noted that they are losing personnel not only to 
private security firms operating in Iraq but also to security 
management companies operating in the United States, and security 
operations in other government agencies. Service officials at these 
commands also attributed the attrition rates to other factors, such as 
the attraction of a strong civilian economy, high operational tempo, 
and concerns about various quality of life conditions. 

Conclusions: 

The reconstruction effort in Iraq is complex, costly, and challenging, 
in part, due to an urgent need to begin and execute reconstruction 
projects in an uncertain security environment. The extensive use of 
private security providers has raised a number of issues, particularly 
regarding how to facilitate methods contractors use to obtain capable 
providers. And, once security providers are actively working in an 
area, they must determine how best to establish effective coordination 
mechanisms with nearby military forces. While the experience in Iraq 
was certainly unique relative to historical reconstruction and 
assistance efforts, it is far less certain whether or not the future 
will find the United States engaged in reconstruction and assistance 
efforts in other hostile environments with costs that are likely to be 
significant. Much has been learned in Iraq over the past two years on 
this subject that can serve the United States and its contractors well 
in planning for and executing future reconstruction or assistance 
efforts. 

Recommendations for Executive Action: 

We are making four recommendations to address a number of immediate and 
long term issues: 

* To assist contractors operating in hostile environments in obtaining 
security services required to ensure successful contract execution, we 
recommend that the Secretary of State, the Secretary of Defense, and 
the Administrator, U.S. Agency for International Development, explore 
options that would enable contractors to obtain such services quickly 
and efficiently. Such options may include, for example, identifying 
minimum standards for private security personnel qualifications, 
training requirements and other key performance characteristics that 
private security personnel should possess; establishing qualified 
vendor lists; and/or establishing contracting vehicles which 
contractors could be authorized to use. 

* To ensure that MNF-I has a clear understanding of the reasons for 
blue on white violence, we recommend that the Secretary of Defense 
direct the Combatant Commander, U.S. Central Command, to direct the 
Commander, MNF-I, to further assess all of the blue on white incidents 
to determine if the procedures outlined in the December 2004 order are 
sufficient. Furthermore, if the procedures have not proven to be 
effective, we recommend that the Commander, MNF-I, develop additional 
procedures to protect both U.S. military forces and private security 
providers. 

* To ensure that commanders deploying to Iraq have a clear 
understanding of the role of private security providers in Iraq and the 
support the military provides to them, we recommend that the Secretary 
of Defense develop a training package for units deploying to Iraq which 
provides information on the Reconstruction Operations Center, typical 
private security provider operating procedures, any guidance or 
procedures developed by MNF-I or MNC-I applicable to private security 
providers (such as procedures outlined in the December 2004 order to 
reduce blue on white incidents), and DOD support to private security 
provider employees. The training package should be re-evaluated 
periodically and updated as necessary to reflect the dynamic nature of 
the situation in Iraq. 

* To improve agencies' ability to assess the impact of and manage 
security costs in future reconstruction efforts, we recommend that the 
Secretary of State, the Secretary of Defense, and the Administrator, 
U.S. Agency for International Development, establish a means to track 
and account for security costs to develop more accurate budget 
estimates. 

Agency Comments and Our Evaluation: 

DOD, the Department of State and USAID provided written comments on a 
draft of this report. Their comments are discussed below and are 
reprinted in appendixes II, III, and IV, respectively. 

DOD concurred with each of our recommendations, noting that it welcomed 
our assistance in improving how DOD and its contractors can plan for 
and effectively execute contracts in a complex and changeable security 
environment. Moreover, DOD described the steps it would take to 
implement some of our recommendations. 

The Department of State disagreed with our recommendation to explore 
options to assist contractors in obtaining private security services, 
citing concerns that the government could be held liable for 
performance failures. For example, while the Department noted that it 
could provide the criteria it utilizes to select its contractors on a 
non-mandatory basis, it expressed concern that contractors relying on 
government minimum standards could assert that performance failures 
were the result of the government establishing poor standards. The 
Department also noted it was unclear that a government-managed security 
contractor program would result in enhanced contractor security, 
compared to a contractor-managed security program. While our work found 
that contractors had difficulty in obtaining security providers that 
met their needs and that they would have benefited from the agencies' 
assistance, we did not recommend a particular course of action nor 
recommend a government-managed security program. Rather, we recommended 
that the Department, working jointly with DOD and USAID, explore 
options to assist contractors that are unfamiliar with obtaining the 
type of security services needed in Iraq. Such an effort would 
necessarily entail a thorough assessment of the advantages, 
disadvantages and risk mitigation strategies of the potential options. 
Given the significance of contractors in accomplishing reconstruction 
objectives and the mixed results that they encountered when selecting 
their security providers, we continue to believe that thoroughly 
exploring potential options would be prudent. 

The Department of State did not indicate whether it agreed with our 
recommendation to establish a means to track and account for security 
costs in order to develop more accurate budget estimates. It noted that 
it can capture costs associated with direct security providers and work 
with prime reconstruction contractors to determine the feasibility of 
providing subcontract security costs. It is not clear to us from the 
Department's comments how it intends to work with DOD and USAID to 
establish a uniform means to track and account for private security 
costs, which is essential given that DOD and USAID are the principal 
agencies responsible for awarding and managing the majority of 
reconstruction contracts. 

In written comments on a draft of this report, USAID found the report 
factually correct, but did not comment on the recommendations. 

We are sending copies of this report to the Chairman and Ranking 
Minority Member, House Committee on Government Reform; the Chairman and 
Ranking Minority Member, House Committee on Energy and Commerce; the 
Chairman and Ranking Minority Member, Senate Committee on Governmental 
Affairs; and other interested congressional committees. We are also 
sending a copy to the Secretary of Defense; the Secretary of State; the 
Administrator, U.S. Agency for International Development; and the 
Director, Office of Management and Budget, and will make copies 
available to others upon request. In addition, the report will be 
available at no charge on the GAO Web site at [Hyperlink, 
http://www.gao.gov]. 

If you or your staff have any questions, please contact Bill Solis at 
202-512-8365 or by e-mail at [Hyperlink, solisw@gao.gov]. Contact 
points for our Offices of Congressional Relations and Public Affairs 
are found on the last page of this report. GAO staff who made major 
contributions to this report are included in appendix V. 

Signed by: 

William Solis: 
Director, Defense Capabilities and Management: 

[See PDF for image]

[End of figure]

David Cooper: 
Director, Acquisition and Sourcing Management: 

List of Congressional Committees: 

The Honorable Richard G. Lugar: 
Chairman: 
Joseph R. Biden, Jr.: 
Ranking Minority Member: 
Committee on Foreign Relations: 
United States Senate: 

The Honorable John Warner: 
Chairman: 
The Honorable Carl Levin: 
Ranking Minority Member: 
Committee on Armed Services: 
United States Senate: 

The Honorable Henry Hyde: 
Chairman: 
The Honorable Tom Lantos: 
Ranking Minority Member: 
Committee on International Relations: 
House of Representatives: 

The Honorable Duncan L. Hunter: 
Chairman: 
The Honorable Ike Skelton: 
Ranking Minority Member: 
Committee on Armed Services: 
House of Representatives: 

[End of section]

Appendixes: 

Appendix I: Scope and Methodology: 

To determine the extent to which U.S. government agencies and 
contractors working in Iraq at the behest of the U.S. government have 
acquired security services from private security providers, we reviewed 
a wide array of documents to determine who was responsible for 
providing security to those types of organizations, including: 

* warning orders and fragmentary orders issued by the U.S. Central 
Command (CENTCOM), Combined Joint Task Force-7, Multi National Forces- 
Iraq, and Multi National Corps-Iraq to determine if any orders had been 
issued regarding providing security to U.S. government employees or 
contractors rebuilding Iraq;

* contracting documents such as statements of work, requests for 
proposals and contracts and contact modifications;

* Department of Defense (DOD) regulations and instructions that relate 
to the management of contractors during contingency operations;

* Departments of State and Defense memoranda of understanding regarding 
security and support;

* proposed guidance between the Department of State and the Department 
of Defense regarding contractor support;

* guidance to contractors prepared by the Coalition Provisional 
Authority (CPA) regarding contractor operations in Iraq; and: 

* Department of State rules and regulations, including the Foreign 
Affairs Manual. 

We also met with officials from CENTCOM to obtain the command's 
position on the extent of the military's responsibility to provide 
security to civilian government employees and contractors, including 
both contractors supporting military forces and those engaged in 
rebuilding Iraq. In addition, we met with or obtained information from 
Army and Marine Corps units that served in Iraq to discuss their 
understanding of the military's responsibility to provide security to 
contractors and civilian government employees and interviewed 
representatives of the State Department's Office of Diplomatic Security 
to discuss the State Department's use of private security providers in 
Iraq as well as representatives of other government agencies working in 
Iraq who have contracted with private security providers to provide 
security to employees and facilities. 

To determine how agencies addressed security needs when planning for 
and awarding Iraq reconstruction contracts, we interviewed officials at 
the CPA; DOD, including the U.S. Army Corps of Engineers and the 
Project and Contracting Office (PCO); the Department of State; and the 
U.S. Agency for International Development (USAID). We discussed the 
guidance and direction they received prior to awarding contracts and 
how such information was provided to the contractors. We reviewed 
various acquisition documents, including agency acquisition plans, 
requests for proposals, price negotiation memoranda, correspondence 
between contractors, and other relevant documents. We met with agency 
and contractor officials to discuss the nature and type of guidance 
provided relative to the expected security environment, the need for 
obtaining security services, and requirements and standards for 
security personnel or security-related equipment. 

We identified how security-related requirements were reflected in 
reconstruction contracts by selecting 16 contracts that were awarded to 
10 reconstruction contractors. We selected these contracts using a 
nonprobabilistic methodology that considered such factors as the 
awarding agency; the year awarded; the contract's expected dollar 
value; and the type, nature and location of the reconstruction 
activity. Nine of these contracts were awarded in 2003 and 7 were 
awarded in 2004. For each of these contracts, we obtained the contract 
and contract modifications issued as of December 31, 2004, totaling 
about $8.6 billion; relevant sections of the contractor's cost and 
technical proposal; security plans; security-related subcontracts; and 
other pertinent documents. We also obtained and reviewed 6 contracts 
that had been awarded by the U.S. Army Corps of Engineers, the 
Department of State, USAID and by an Army contracting agency for the 
CPA, for the protection of their personnel and facilities in Iraq to 
compare the type of security-related requirements incorporated within 
U.S. government contracts with those incorporated into contracts 
awarded to reconstruction contractors and, in turn, to subcontracts 
with security providers. 

We identified whether there are existing government or international 
standards relative to security providers that were applicable to the 
Iraqi security environment. We also spoke with agency security 
personnel, including the Department of State's Office of Diplomatic 
Security and the Overseas Security Advisory Council. We also contacted 
representatives from relevant industry associations, including the 
International Peace Operations Association, International Security 
Management Association, and the American Society for Industrial 
Security. We also researched European security-provider standards and 
conducted a literature review of articles relating to the security 
provider industry. 

To assess the military's relationship with private security providers, 
we met with or spoke to representatives of CENTCOM, Army Central 
Command, and the PCO (at the Pentagon and in Baghdad) to discuss issues 
related to the military's authority over private security providers and 
reviewed a Department of Defense report to Congress addresses the use 
of private security providers in Iraq. We also met with or contacted 
representatives of Army and Marine Corps units that had been stationed 
in Iraq to determine if they had been provided guidance on working with 
private security providers and discussed issues related to command and 
control of private security providers. 

To assess the level of cooperation and coordination between the 
military and private security providers both before and after the 
advent of the Reconstruction Operations Center (ROC), we spoke with 9 
private security providers working in Iraq as well as representatives 
of military units which had served in Iraq to determine the state of 
coordination prior to and after the ROC became operational. We spoke 
with representatives of the PCO to discuss the ROC's role in 
coordinating the interactions between the military and private security 
providers and any actions the PCO was taking to improve coordination 
between private security providers and U.S. military forces. We also 
discussed coordination issues with the executive director of the 
Private Security Company Association of Iraq and several reconstruction 
contractors. We also reviewed information posted on the ROC Web site 
related to security and reviewed documents developed by the ROC to 
explain its operations and functions. 

To determine the extent to which government agencies assessed the costs 
associated with using private security providers and security-related 
costs, we reviewed various contractual documents, including the 16 
reconstruction contracts and subsequent modifications, consent to 
subcontract requests, and monthly cost and progress reports submitted 
by the contractors we reviewed. We also met with agency and contractor 
officials to determine the means by which they maintained visibility 
over security providers and security-related expenses, as well as their 
general experiences in Iraq, the impact of security on reconstruction 
efforts, and the process by which they obtained security providers. 

We collected data on the costs associated with acquiring and using 
private security providers or in-house security teams; and the cost 
associated with acquiring security-related equipment, such as armored 
vehicles, body armor, communication equipment, and other security- 
related costs. We did not attempt to quantify the impact of the 
security environment on increased transportation or administrative 
expenses, on the pace of reconstruction efforts caused by security- 
related work stoppages or delays, or the cost associated with repairing 
the damage caused by the insurgency on work previously completed. We 
also excluded the cost associated with the training and equipping of 
Iraqi security forces, or the costs borne by DOD in maintaining, 
equipping, and supporting U.S. troops in Iraq. 

For the 16 contracts we reviewed, we identified whether the agencies or 
the contractors had initially projected the cost of obtaining private 
security services. We reviewed various documents, including agency 
acquisition strategy plans and price negotiation memoranda; the 
contractor's cost proposals and security plans; and interviewed agency 
and contractor officials. We identified the actual costs incurred for 
security services and equipment by reviewing various cost 
documentation, including invoices, vouchers, and billing logs submitted 
by the contractors and their security provider(s) through the period 
ending December 31, 2004. We analyzed this information to determine: 

* the total amount billed by the contractor to the government;

* the amount billed by security subcontractors to the contractor; and: 

* the amount billed for other security-related expenses, such as 
armored vehicles, body armor, communication, transportation costs, 
lodging, and other security-related equipment. 

We estimated the percentage of costs accounted for by private security 
providers and for security-related equipment by comparing the combined 
amount billed for these activities to the total amount billed by the 
reconstruction contractor to the government. We did not attempt to 
comprehensively identify costs that may have been incurred by 
subcontractors or lower tier contractors. We did, however, request 
information from the contractors as to whether their subcontractors 
required security above that which would typically be required, and if 
so, whether the subcontractor arranged for its own security or relied 
on security provided by the reconstruction contractor. We obtained 
examples and cost information on selected cases in which subcontractors 
provided their own security. 

As part of our efforts, we reviewed pertinent sections of the Federal 
Acquisition Regulation, and in particular, the subcontractor 
competition and notification requirements provided for under Part 44; 
and relevant CPA, DOD, State Department, and USAID acquisition 
regulations, policy memoranda and guidance. We coordinated our work 
with and reviewed reports prepared by the Inspectors General for DOD, 
State, and USAID; the Special Inspector General for Iraq 
Reconstruction; and the Defense Contract Audit Agency. 

To determine whether private security providers were hiring former 
military servicemembers, we interviewed three private security 
providers from the United States that are working in Iraq and discussed 
the skill sets they hire. Additionally, we spoke with officials at the 
Marine Corps and Navy human resources commands; the Air Force's Deputy 
Chief of Staff, Personnel; the Army's Human Resources Command Military 
Police Branch and the Special Operations Command Personnel Division to 
ascertain whether certain military occupational specialties and ranks 
were seeing increased attrition and if private security providers were 
affecting military attrition. We also reviewed a transcript of a 
congressional hearing on Special Operations Forces personnel issues 
held in July 2004. 

To assess the extent to which military occupational specialties 
utilized by private security providers in Iraq are seeing increased 
attrition we obtained attrition information from the Defense Manpower 
Data Center's Active Duty Military Officer and Enlisted Master Files, 
which is an inventory of all individuals on active duty in the 
services. Our analysis was limited to active duty personnel and did not 
include reservists. The Center provided information on personnel 
numbers and losses for fiscal years 2000, 2001, 2002, 2003, and 2004. 
Attrition for the purposes of this report is an active duty member who 
is on active duty at the start of a given fiscal year and is no longer 
on active duty in the same service in the same pay category at the end 
of that fiscal year. An enlisted member who becomes a warrant or 
commissioned officer (or vice versa) or a member who changes services 
is considered to be a loss. The fiscal year lasts from October 1st of 
the previous year to September 30TH of the named year. For example, 
fiscal year 2000 lasted from October 1, 1999 to September 30, 2000. 
Personnel numbers were calculated as the total number of members at the 
start of the fiscal year (for example, October 1, 1999 for fiscal year 
2000). Losses are the endforce members who have attrited during the 
fiscal year (For example, for fiscal year 2000, losses would be the 
number of personnel attrited from October 1, 1999 to September 30, 
2000.)

We received data from the Defense Manpower Data Center on active duty 
attrition rates for five military occupational specialties: special 
forces, military police, infantry, para-rescue, and combat controller. 
These military occupational groupings were selected because they 
represented military occupational skills most sought after by private 
security providers working in Iraq, as determined through interviews 
with officials at the human resources commands and private security 
companies. These data were then analyzed to determine whether attrition 
rates had increased in the past five years and whether servicemembers 
were separating from the military at increasing rates in certain ranks 
or number of years of service. 

We assessed the reliability of the Defense Manpower Data Center's 
Active Duty Military Personnel Master file by (1) reviewing existing 
information about the data and the system that produced them, and (2) 
interviewing agency officials knowledgeable about the data. We 
determined that the data were sufficiently reliable for the purpose of 
this report. 

We visited or interviewed officials from the following organizations 
during our review: 

Department of State: 

* Bureau of Diplomatic Security, Washington, D.C;

* U.S. Embassy, Amman, Jordan;

* The U.S. Agency for International Development, Washington, D.C., 
Baghdad, Iraq; and Amman, Jordan. 

Department of Defense: 

* Office of the Under Secretary of Defense, Personnel and Readiness, 
Military Personnel Policy, the Pentagon;

* The Defense Contract Audit Agency, Fort Belvoir, Virginia. 

Department of the Air Force: 

* Office of the Deputy Chief of Staff, Personnel, Force Management 
Division. 

Department of the Army: 

* United States Army Human Resources Command Military Police Branch, 
Alexandria, Virginia;

* United States Army Central Command (Rear), Fort McPherson, Georgia;

* Project and Contracting Office (Rear), the Pentagon;

* U.S. Army Corps of Engineers, Washington, D.C;

* Southwestern Division, Dallas, Texas;

* Transatlantic Program Center, Winchester, Virginia;

* Gulf Regional Division, Baghdad, Iraq;

* The Army Contracting Agency, Fort Eustis, Virginia;

* 1st Armored Division, Wiesbaden, Germany;

* 82nd Airborne Division, Fort Bragg, North Carolina;

* 2nd Armored Cavalry Regiment, Fort Polk, Louisiana;

* 1st Cavalry Division, Fort Hood, Texas. 

Department of the Navy: 

* Naval Personnel Command, Millington, Tennessee;

* Marine Corps Manpower Plans and Policy Division, Washington, D.C;

* 1st Marine Corps Expeditionary Force, Camp Pendleton, California. 

Unified Combatant Commanders: 

* United States Central Command, MacDill Air Force Base, Florida;

* United States Special Operations Command Personnel Division, MacDill 
Air Force Base, Florida. 

Contractors: 

* Aegis Defence Services, Ltd., London, United Kingdom;

* ArmorGroup, London, United Kingdom;

* BearingPoint Inc., McLean, Virginia;

* Bechtel National, Inc., San Francisco, California;

* Blackwater USA, Moyock, North Carolina;

* CONTRACK International, Inc., Arlington, Virginia;

* Control Risk Group, London, United Kingdom;

* Creative Associates International, Inc., Washington, D.C;

* DynCorp International, Irving, Texas;

* Fluor Intercontinental, Inc., Greenville, South Carolina;

* General Electric, Atlanta, Georgia;

* Global Risk Strategies, London, United Kingdom;

* Kellogg Brown and Root Services, Inc., Houston, Texas;

* Olive Security, London, United Kingdom;

* Parsons Corporation, Pasadena, California;

* Perini Corporation, Framingham, Massachusetts;

* Research Triangle Institute, Research Triangle Park, North Carolina;

* Triple Canopy, Lincolnshire, Illinois;

* The Hart Group, London, United Kingdom; and: 

* Washington Group International, Inc., Boise, Idaho; and Princeton, 
New Jersey. 

Industry Associations: 

* American Society for Industrial Security International, Alexandria, 
Virginia;

* International Peace Operations Association, Washington, D.C;

* International Security Management Association, Buffalo, Iowa;

* Private Security Company Association of Iraq, Baghdad, Iraq;

* Professional Services Council, Arlington, Virginia. 

We conducted our review from May 2004 through June 2005 in accordance 
with generally accepted government auditing standards. 

[End of section]

Appendix II: Comments from the Department of Defense: 

OFFICE OF THE UNDER SECRETARY OF DEFENSE: 
ACQUISITION, TECHNOLOGY AND LOGISTICS: 

3000 DEFENSE PENTAGON: 
WASHINGTON, DC 20301-3000: 

JUL 19 2005: 

Mr. William M. Solis: 
Director, Defense Capabilities and Management: 
U.S. General Accountability Office: 
441 G Street, N.W.: 
Washington, D.C. 20548: 

Dear Mr. Solis: 

This is the Department of Defense (DoD) response to the GAO draft 
report, "REBUILDING IRAQ: Actions Needed To Improve Use Of Private 
Security Providers," dated June 15, 2005 (GAO Code 350554/GAO-05-737). 
We welcome your assistance in improving how the DoD and its contractors 
can plan for and effectively execute contracts for reconstruction or 
assistance efforts in a complex and changeable security environment. 
Enclosed are DoD's detailed comments regarding the recommendations on 
pages 45 and 46 of your draft report. 

We appreciate the opportunity to review and comment on your findings. 

Sincerely,

Signed by: 

Deidre A. Lee: 
Director, Defense Procurement and Acquisition Policy: 

Enclosure: As stated: 

GAO DRAFT REPORT - DATED JUNE 15, 2005 GAO CODE 350554/GAO-05-737: 

"REBUILDING IRAQ: ACTIONS NEEDED TO IMPROVE USE OF PRIVATE SECURITY 
PROVIDERS"

DEPARTMENT OF DEFENSE COMMENTS TO THE RECOMMENDATIONS: 

RECOMMENDATION 1: The GAO recommended that the Secretary of State, the 
Secretary of Defense, and the Administrator, Agency for International 
Development, explore options that would enable contractors to obtain 
security services quickly and efficiently. Such options might include 
identifying minimum standards for security personnel qualifications, 
training requirements and other key performance characteristics that 
security personnel should possess. (pages 45 & 46/GAO Draft Report): 

DOD RESPONSE: Concur. 

RECOMMENDATION 2: The GAO recommended that the Secretary of Defense 
direct the Combatant Commander, U.S. Central Command, to direct the 
Commander, Multi-National Force-Iraq (MNF-1), to further assess all of 
the blue on white incidents to determine if the procedures outlined in 
the December 2004 order are sufficient. If the procedures have not 
proven to be effective, the GAO recommends that the Commander, MNF-I, 
develop additional procedures to protect both U.S. military forces and 
private security providers. (p. 46/GAO Draft Report): 

DOD RESPONSE: Concur. DoD's current approach, which leverages the 
Reconstruction Operations Center (ROC) to improve coordination between 
military forces and Private Security Companies (PSC), is proving 
effective. There is value in re-evaluating its effectiveness in 
reducing blue-on-white engagements after a period of time. The Joint 
staff will develop an approach for assessing and improving procedures 
for coordination between military forces and PSCs. 

RECOMMENDATION 3: The GAO recommended that the Secretary of Defense 
develop a training package for units deploying to Iraq which provides 
information on the Reconstruction Operations Center, typical private 
security provider operating procedures, any guidance or procedures 
developed by MNF-I or MNF-C applicable to private security providers, 
and DoD support to private security provider employees. (p. 46/GAO 
Draft Report): 

DOD RESPONSE: Concur. Training materials would benefit both operational 
military forces and PSCs. The Joint Staff will develop an appropriate 
training strategy. 

RECOMMENDATION 4: The GAO recommended that the Secretary of State, the 
Secretary of Defense, and the Administrator, U.S. Agency for 
International Development, establish a means to track and account for 
security costs in order to develop more accurate budget estimates. (p. 
46/GAO Draft Report): 

DOD RESPONSE: Concur. The Secretary of State is responsible for 
submitting a quarterly report to Congress that outlines the current 
status of programs, initiatives and funds dedicated to the Iraq 
reconstruction efforts. As such, the Department of Defense will support 
the Department of State's efforts to collect security cost data, since 
the Department of State is the lead organization responsible for 
directing and reporting on U.S. reconstruction efforts in Iraq. The 
Department of Defense will collect readily available data on incurred 
security costs under existing contracts and will establish procedures 
on accounting for security costs under future reconstruction contracts. 
Additionally, the Under Secretary of Defense (Comptroller) will work 
collaboratively with the Department of State and the Administrator, 
U.S. Agency for International Development to establish a uniformed 
means to track and account for costs incurred by reconstruction 
contractors for private security costs in order to develop more 
accurate budget estimates in the future. 

[End of section]

Appendix III: Comments from the Department of State: 

United States Department of State: 
Assistant Secretary and Chief Financial Officer: 
Washington, D.C. 20520: 

JUL 15 2005: 

Ms. Jacquelyn Williams-Bridgers: 
Managing Director: 
International Affairs and Trade: 
Government Accountability Office: 
441 G Street, N.W. 
Washington, D.C. 20548-0001: 

Dear Ms. Williams-Bridgers: 

We appreciate the opportunity to review your draft report, "REBUILDING 
IRAQ: Actions Needed to Improve Use of Private Security Providers," GAO 
Job Code 120354 and 350544. 

The enclosed Department of State comments are provided for 
incorporation with this letter as an appendix to the final report. 

If you have any questions concerning this response, please contact 
Corey Rindner, Procurement Executive, Bureau of Administration, at 
(703) 516-1689. 

Sincerely,

Signed by: 

Sid Kaplan (Acting): 

cc: GAO - Tim DiNapoli; 
A - Frank Coulter; 
State/OIG - Mark Duda: 

Department of State Comments on GAO Draft Report REBUILDING IRAQ: 
Actions Needed to Improve Use of Private Security Providers (GAO-OS- 
737, GAO Code 120354): 

Thank you for the opportunity to comment on your draft report entitled 
Rebuilding Iraq: Actions Needed to Improve Use of Private Security 
Providers. Where the Department of State has additional comments they 
are outlined after the recommendation as noted below. 

GAO Draft Recommendation 1: To assist contractors operating in hostile 
environments in obtaining security services required to ensure 
successful contract execution, we recommend that the Secretary of 
State, the Secretary of Defense, and the Administrator, U.S. Agency for 
International Development, explore options that would enable 
contractors to obtain such services quickly and efficiently. Such 
options might include, for example, identifying minimum standards for 
[Recommend GAO insert "private"] security personnel qualifications, 
training requirements and other key performance characteristics that 
[Recommend GAO insert "private"] security personnel should possess, 
establishing qualified vendor lists, and/or establishing contracting 
vehicles which contractors could be authorized to use. 

Department of State Comment: State disagrees with the recommendation: 
The Department can make available to contractors the criteria it 
utilizes to select its contractors, but would be reluctant to mandate 
the use by contractors selecting their own security providers. 
Contractors relying on government minimum standards could assert that 
performance failures are the result of poor standards established by 
the government. 

Government established contracts and qualified vendor lists also 
subject the government to claims in the event of poor performance. The 
government would have to determine that all vendors are responsible and 
capable of performance. Failure to perform could be alleged to be the 
result of poor government selection. 

Furthermore, the Department of State is unclear from GAO's report what 
evidence exists that a Government-managed security contractor program 
for private contractors would result in enhanced contractor security, 
compared to a contractor-managed security program. Yet, the Department 
of State does recognize that the additional administrative costs and 
potential liability from a Government-managed security contractor 
program could be substantial. 

GAO Recommendation 4: To improve agencies' ability to assess the impact 
of and manage security costs in future reconstruction efforts, we 
recommend that the Secretary of State, the Secretary of Defense, and 
the Administrator, U.S. Agency for International Development, establish 
a means to track and account for security costs in order to develop 
more accurate budget estimates. 

Department of State Comment: For those contracts that are direct 
security providers, State can capture those contract costs. For 
contracts that would require a prime contractor to subcontract for 
security services, State can work with prime contractors to determine 
the feasibility of providing the subcontracting costs for security 
services. 

[End of section]

Appendix IV: Comments from U.S. Agency for International Development: 

USAID: 

FROM THE AMERICAN PEOPLE: 

July 8, 2005: 

Mr. William S. Solis: 
Director: 
Defense Capabilities and Management: 
U.S. Government Accountability Office 441 G Street., N.W. 

Washington, D.C. 20548: 

Dear Mr. Solis: 

I am pleased to provide the U.S. Agency for International Development's 
(USAID) formal response on the draft GAO report entitled Rebuilding 
Iraq: Actions Needed to Improve Use of Private Security Providers [GAO- 
05-737]. 

USAID has reviewed the report and finds it to be factually correct. We 
have no further comments on the report. 

Thank you for the opportunity to respond to the GAO draft report and 
for the courtesies extended by your staff in the conduct of this 
review. 

Sincerely,

Signed by: 

Steven G. Wisecarver: 
Acting Assistant Administrator: 
Bureau for Management: 

U.S. Agency for International Development: 
Office of Iraq Reconstruction: 
1300 Pennsylvannia Ave. N.W.: 
Washington DC 20523: 

Tel: 202-712-0448: 
Fax 202-216-3872: 

[End of section]

Appendix V: GAO Contacts and Staff Acknowledgements: 

GAO Contacts: 

William Solis (202) 512-8365: 

David Cooper (617) 788-0555: 

Acknowledgments: 

In addition to the contacts named above, Steve Sternlieb, Timothy 
DiNapoli, Carole Coffey, Gary Delaney, John Heere, William Petrick, 
Timothy Wilson, Moshe Schwartz, Kate Walker, Robert Ackley, David 
Mayfield, and Sylvia Schatz made key contributions to this report. 

(350544): 

FOOTNOTES

[1] We recently discussed breakdowns in the procurement process when 
contracting for interrogators and other services in Iraq. See GAO, 
Interagency Contracting: Problems with DOD's and Interior's Orders to 
Support Military Operations, GAO-05-201 (Washington, D.C.: Apr. 29, 
2005). 

[2] These concerns have been expressed in requests from numerous 
members of Congress that the Comptroller General review the 
operational, legal, and contracting issues involving the use of private 
security providers in Iraq. Congress has subsequently included several 
provisions in legislation designed to improve the management of and 
support and protection provided to contractor personnel who support 
deployed forces or who are in a combatant commander's area of 
responsibility. See Ronald W. Reagan National Defense Authorization Act 
for Fiscal Year 2005, Pub. L. No. 108-375, section 1205 and 1206 (Oct. 
28, 2004) and H.R. 1815, 109th Cong. title XVI (2005). 

[3] CENTCOM is the U.S. military command responsible for prosecuting 
the war in Iraq. 

[4] On one additional 2003 contract, the contractor provided its own 
security. 

[5] Stop loss prevents servicemembers from leaving the service even 
though they may have reached the end of their enlistment or service 
obligation. 

[6] In May 2004, the President signed National Security Presidential 
Directive 36, which established the PCO as a temporary organization 
within DOD. The PCO provides acquisition and project management support 
for the reconstruction effort in Iraq. PCO personnel in Iraq are 
permanently or temporarily assigned under the Chief of Mission 
authority. 

[7] DFARS Subpart 225.74. 

[8] In response to public comments on the proposed new DFARS clause for 
contractor personnel supporting a force outside the United States, DOD 
stated that the new clause does not apply to nation building efforts 
such as the reconstruction of Iraq. See 70 Fed. Reg. 23791. 

[9] We recently discussed the Department's efforts to protect U.S. 
officials working abroad. See GAO, Overseas Security: State Department 
Has Not Fully Implemented Key Measures to Protect U.S. Officials from 
Terrorist Attacks Outside of Embassies, GAO-05-642 (Washington, D.C.: 
May 9, 2005). 

[10] One memorandum was signed by the Deputy Secretary of Defense and 
the Deputy Secretary of State, the second was signed by the Ambassador 
to Iraq and the Combatant Commander, U.S. Central Command. The first 
memorandum deals with security assistance, the second with security 
responsibilities. 

[11] All executive branch agencies in Iraq are part of U.S. Mission 
Iraq except those which fall under the command of the CENTCOM 
commander. 

[12] A U.S. Army contracting activity awarded several security 
contracts on behalf of the CPA. 

[13] On one additional 2003 contract, the contractor provided its own 
security. 

[14] Pursuant to FAR Part 44, subcontracts are generally required to be 
awarded competitively, to the maximum practicable extent. The 
contractor prepared a justification, which was, in turn, approved by 
the contracting office. 

[15] USAID awarded its security contract on a sole-source basis citing 
an urgent and compelling need. In January 2005, the USAID Inspector 
General found, however, that in its efforts to award the contract 
quickly, USAID failed to adequately document the selection of the 
security provider and the purchase of armored vehicles that did not 
meet U.S. government standards. USAID generally agreed with the 
Inspector General's findings and is taking corrective actions. 

[16] For example, the General Services Administration currently 
maintains a multiple award schedule that federal agencies can use to 
obtain various types of security services within the United States. 

[17] DOD report to Congressional Defense Committees as required by the 
Ronald W. Reagan National Defense Authorization Act for fiscal year 
2005, Pub. L. No. 108-375, section 1206 (Oct. 28, 2004). 

[18] Although DOD does not have an explicit command and control 
relationship with private security providers, there are sanctions that 
can be imposed in response to acts of misconduct. DOD points out in its 
report to Congress that private security providers, in the absence of a 
formal declaration of war by Congress, are generally not subject to 
prosecution under the Uniform Code of Military Justice, but they remain 
subject to prosecution by the Department of Justice under applicable 
U.S. federal laws, to include the Military Extraterritorial 
Jurisdiction Act (18 U.S.C. 3261), the special maritime and territorial 
jurisdiction provisions of 18 U.S.C. 7(9), and the War Crimes Act (18 
U.S.C. 2441). To date, DOD reports that there have been no disciplinary 
actions brought against private security providers for acts of criminal 
misconduct. 

[19] See Department of Defense Directive 5200.8, Security of DOD 
Installations and Resources (Apr. 25, 1991). 

[20] Combined Joint Task Force-7 was a subordinate command of CENTCOM 
and was responsible for the daily prosecution of the war. It was 
succeeded by Multi National Force-Iraq (MNF-I) in May 2004. 

[21] Emergency Supplemental Appropriations Act for Defense and for the 
Reconstruction of Iraq and Afghanistan for FY 2004, Pub. L. No. 108- 
106, section 2207 (Nov. 6, 2004) as amended by Pub. L. No. 108-309, 
section 135 (Sep. 30, 2004). 

[22] One contractor did not specifically track or report the security 
costs it incurred under the contract. 

[23] Overall, the costs to obtain private security services and related 
security equipment for the 15 reconstruction contracts that we were 
able to obtain and review were about $334 million, or about 7 percent 
of total contract billings as of December 31, 2004. 

[24] Several contractor officials noted the cost of security relative 
to total contract costs can vary over time. For example, they noted 
that initial security costs, such as for mobilizing and equipping 
security personnel and purchasing armored vehicles, can be considerable 
in relation to the amount of reconstruction work authorized. As 
additional work is authorized, the relative percentage accounted for by 
security costs could decrease considerably. 

[25] In three other contracts, the contractors indicated that they 
provided security for their subcontractors; one contractor did not hire 
subcontractors; and in the five remaining contracts, the contractor did 
not know about or did not provide information on subcontractor security 
needs. 

[26] DMDC collects and maintains an archive of DOD's automated 
manpower, training, and financial databases. 

[27] Stop losses are short-term measures that increase force 
availability by retaining active or reserve component members on active 
duty beyond the end of their obligated service. 

[28] In this report, operational tempo refers to the total days 
military personnel spend participating in normal drills, training, and 
exercises, as well as domestic and overseas operational missions. 

GAO's Mission: 

The Government Accountability Office, the investigative arm of 
Congress, exists to support Congress in meeting its constitutional 
responsibilities and to help improve the performance and accountability 
of the federal government for the American people. GAO examines the use 
of public funds; evaluates federal programs and policies; and provides 
analyses, recommendations, and other assistance to help Congress make 
informed oversight, policy, and funding decisions. GAO's commitment to 
good government is reflected in its core values of accountability, 
integrity, and reliability. 

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through the Internet. GAO's Web site ( www.gao.gov ) contains 
abstracts and full-text files of current reports and testimony and an 
expanding archive of older products. The Web site features a search 
engine to help you locate documents using key words and phrases. You 
can print these documents in their entirety, including charts and other 
graphics. 

Each day, GAO issues a list of newly released reports, testimony, and 
correspondence. GAO posts this list, known as "Today's Reports," on its 
Web site daily. The list contains links to the full-text document 
files. To have GAO e-mail this list to you every afternoon, go to 
www.gao.gov and select "Subscribe to e-mail alerts" under the "Order 
GAO Products" heading. 

Order by Mail or Phone: 

The first copy of each printed report is free. Additional copies are $2 
each. A check or money order should be made out to the Superintendent 
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 
more copies mailed to a single address are discounted 25 percent. 
Orders should be sent to: 

U.S. Government Accountability Office

441 G Street NW, Room LM

Washington, D.C. 20548: 

To order by Phone: 

Voice: (202) 512-6000: 

TDD: (202) 512-2537: 

Fax: (202) 512-6061: 

To Report Fraud, Waste, and Abuse in Federal Programs: 

Contact: 

Web site: www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470: 

Public Affairs: 

Jeff Nelligan, managing director,

NelliganJ@gao.gov

(202) 512-4800

U.S. Government Accountability Office,

441 G Street NW, Room 7149

Washington, D.C. 20548: