By JAKE WIENS
It's like a bad movie that never seems to end. First Kuwaiti General Trading & Contracting Company, the contractor responsible for bungling the construction of the U.S. Embassy in Baghdad, has sent the State Department a list of claims totaling hundreds of millions of dollars related to its work on that Embassy, according to people familiar with the situation.
Totaling over $375 million, the claims include $22 million for extra security, nearly $13 million for danger pay, and a hair over $4 million for food shortages. The majority of the claims pertain to a “War Risk” clause in First Kuwaiti’s contracts, according to documents reviewed by POGO.
The claims come more than three years after the completion of the Embassy. They also come just months after a heated exchange during a Commission on Wartime Contracting (CWC) hearing, in which CWC Commissioner Charles Tiefer pressed the State Department’s top management official, Patrick Kennedy, to commit to seek a $132 million rebate from First Kuwaiti.
The State Department Office of Inspector General (OIG) recommended the Department attempt to recover that amount from the contractor in an October 2009 audit. The audit detailed a laundry list of deficiencies associated with First Kuwaiti’s work on the Baghdad Embassy.
In response to the OIG’s recommendations, State asserted that the OIG would “need to furnish the Contracting Officer a detailed breakdown of how each dollar value in these recommendations was computed” in order for State to formally request a rebate.
Nearly two years later, during the CWC hearing, Kennedy claimed that State had repeatedly asked the OIG for this breakdown, and strongly insinuated that they had yet to receive it:
On the $132 million, we have asked the Office of the Inspector General on several occasions to provide us with a line-by-line breakdown of how they arrived at that $132 million figure. We cannot proceed against a contractor without specific details. The case would be thrown out in any court that I can imagine. We cannot just send them a letter saying, "send me a check for $132 million." We have to have the details. We have asked for them. I can promise you that we will continue to ask for them.
But the State Department OIG, in response to questions submitted by POGO sent via email, said that the details justifying the cost estimates had been shared with State in late 2009, shortly after the release of the audit, and that State acknowledged at the time that the requested information had been “satisfactorily provided.” The details included all “work papers, deficiency descriptions, photographs, engineering analyses, [and] cost estimates,” according to the OIG.
POGO asked the State Department to reconcile Kennedy’s testimony with the OIG’s account. In response, State acknowledged via email that it had received the information, but maintained that it lacked the “necessary detail to pursue a claim, especially against a foreign contractor with limited reachable assets.”
State’s failure to act on the recommendation of the OIG is not surprising. As the OIG noted in its 2009 audit, regarding State’s oversight of First Kuwait, State officials “did not enforce contract provisions, most notably design and construction requirements, which resulted in many of the construction deﬁciencies.” Furthermore, the audit noted that “Even though First Kuwaiti did not meet the required contract completion dates for three contracts, covering housing, infrastructure, and support facilities, [State] did not require First Kuwaiti to pay $10.9 million in liquidated damages.” These shortcomings fit into a well-documented pattern of State failing to hold its contractors accountable.
Given this history, it’s not unreasonable to wonder how thoroughly State will vet the claims recently submitted by First Kuwaiti. Speaking of these claims, State told POGO via email it would review the OIG’s “recommendations afresh with a view to determining whether they present appropriate defenses or counterclaims.”
We hope that they do. Assuming that the State Dept. does not recoup the $132 million recommended by the OIG, the recent claims, if paid in full, would bring the price tag for the Embassy to over a billion dollars—nearly double the amount in the original contract.
Writing a check for a few hundred million dollars would provide a fitting (if somewhat outrageous) end to the bizarre relationship between State and First Kuwaiti—a relationship that has involved allowing First Kuwaiti to continue to work on U.S. embassies around the world (with consistent incompetence) through subcontracts with a small American company, Aurora LLC.
State Department officials told McClatchy last year that they suspected this company was set up as a “front” for First Kuwaiti. First Kuwaiti and other U.S. government officials have denied that claim. (But in a subsequent article, McClatchy reporter Warren Strobel wrote that a contract between Aurora and First Kuwaiti says that First Kuwaiti was “secretly, but really, running the show”)
In addition, POGO blog readers may remember that an email released by POGO suggests that State Department employees felt Kennedy was improperly advocating on behalf of Aurora LLC.
But, as seems to always be the case when it comes to State’s relationship with First Kuwaiti, this saga will likely go on: According to insiders, First Kuwaiti is expected to make claims on the Embassy for even more money in the near future. And considering State’s apparent inability, or unwillingness, to hold it to account, why wouldn’t it ask for more?
Jake Wiens is a POGO Investigator.
Image of Baghdad New Embassy Compound via the State Department.