$75 million to run a single PRT is not excessive?

Map from OIG/MERO Report

The State Department’s Office of the Inspector General (OIG) has just released two Iraq-related reports the last few days. One on the Embassy’s transition planning as the Department take on increased roles and responsibilities following the withdrawal of all US forces from Iraq by December 31, 2011 (we’ll get to that in a separate post); the other report is a review of the effectiveness of Regional Embassy Offices (REOs) in Iraq.

Quick background:

“In the summer of 2004, upon the disestablishment of the Coalition Provisional Authority, the Department established Regional Embassy Offices (REO) in the cit­ies of Basra and Hillah in southern Iraq, and Kirkuk and Mosul in northern Iraq.1 In February 2009, REO Kirkuk closed. Most of its functions were transferred to the Regional Reconstruction Team (RRT) located in downtown Erbil. In May 2009, REO Basra was closed and replaced by the Provincial Reconstruction Team (PRT) in Basra. When the OIG audit began in December 2008, three REOs were operating, but as of the date of this report, only REO Hillah is active.”

Now – the good news:

“REOs, as diplomatic extensions of Embassy Baghdad, were important in pro­jecting an active USG presence in Iraq’s outlying provinces. REOs effectively served as bases for conducting engagements with Iraqis, reported firsthand on political and economic developments in the provinces, and acted as vital nearby staging areas for personal protection operations.”

The not so good news? These bases for engagement come at a pretty stiff price tag:

“[…] Operating and supporting a forward-deployed USG civilian presence is a challenging and expensive proposition. Due to the unstable security environ­ment in Iraq, REOs depended on private contractors to provide life support and personal protective services. At the time of this audit, there were a total of 265 USG staff members at REO Basra, RRT Erbil, and REO Hillah, and a total of 1,027 life support and personal security contractors — a ratio of nearly four life support and personal security contractors to each USG staff member.”

$75 million to run a 37-member PRT. From the OIG report:

REO Hillah was established in June 2004 on the site of the former regional headquarters of the Coalition Provisional Authority for south central Iraq. The south central area is known as the Shia heartland, with the city of An Najaf serving as the capital. Babil Province, south of Baghdad, has a mixed Sunni and Shia population, and is an important transport and fuel network, which creates sectarian volatility. REO Hillah mainly served as a base for five PRTs operating in Babil, Karbala, Najaf, Wasit, and Qadisiyah. However, by early 2008, four of the PRTs in Hillah were trans­ferred to their respective provinces, and REO Hillah supported only PRT Babil.

OIG visited REO Hillah in February 2009, and an interim report was issued in April 2009 recommending: (1) stopping or curtailing all capital improvement proj­ects; (2) relocating PRT Babil and other USG employees to a nearby U.S. Army base; (3) curtailing or transferring REO Hillah security and support staff to other locations in Iraq; and (4) decommissioning and returning the Hillah hotel property to the Government of Iraq.

Embassy Baghdad objected to OIG’s recommendation to accelerate the closing of REO Hillah stating that speeding closure and relocation would undermine an existing process moving forward at a measured pace. The Embassy emphasized the need to consider the negative impact on all of the organizations and personnel supported by the REO.

Embassy Baghdad had calculated $55 million in annual security costs at REO Hillah to support approximately 300 personal security specialists and a perimeter guard force. The annual support costs for about 350 KBR employees and locally hired Iraqis was estimated at $20 million. REO Hillah is currently supporting one 37-member PRT, and OIG determined that $75 million in annual operating costs was excessive and an expensive way to support a single PRT. OIG observed that cost savings of $6.5 million a month meant that closure of the REO by May 2009 could result in savings of more than $32 million in FY 2009.

In addition to the operating costs, REO Hillah had 10 capital improvement projects underway, including three not yet begun and valued at $1.4 million, four projects that were 15 percent completed leaving $235,000 unobligated, and three projects 25 to 73 percent completed with $643,000 unobligated, adding up to potentially nearly $2.3 million in unexpended funds. OIG has learned that the Embassy has stopped all capital improvement projects at REO Hillah. The Embassy’s contracting officer’s representative, with management support, rejected requests by the site contractor to continue with several proposals, including work on a firing range, procurement of communications systems for fire trucks, and purchase of handheld radios.

However, as of July 2, 2009, Embassy Baghdad had not taken any further action toward closing REO Hillah. Therefore, OIG reiterates its recommendation to accelerate the relocation of PRT Babil and the closure of REO Hillah.

The Embassy is understandably concerned about the “negative impact on all of the organizations and personnel supported by the REO.” But please let’s think about this for a moment. If REO Hillah is supporting a 37-member PRT, that’s over $2 million dollars to support each PRT member in that location. The move would be inconvenient for sure, but how much of a negative impact is there going to be if the PRT operation moves to the nearby U.S. Army base as suggested by the OIG? I would have felt much better if Embassy Baghdad quantified that in their response to the report; otherwise, I can’t help but agree that $75 million is just a tad much as operation cost for a 37-member PRT.

On a related note — AFP recently reported that in May this year, the administration projected a 3.998 trillion dollar budget for 2009 with a deficit of 1.841 trillion dollars, reflecting swollen spending amid the worst economic crisis on record. The estimated budget deficit for the current fiscal 2009 ending September 30 will reportedly be trimmed to 1.58 trillion dollars, around 262 billion dollars lower than forecasted. Yay?!

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