“Flagrant 5” Firm Among Top USAID Afghan Relief Recipients

Last week, the Project On Government Oversight blogged about a Special Inspector General for Afghanistan Reconstruction (SIGAR) analysis of the $4 billion obligated by the State Department for Afghanistan reconstruction. Today, we look at SIGAR’s analysis of the United States Agency for International Development’s (USAID) Afghanistan assistance.

According to SIGAR, from the beginning of fiscal year 2002 to June 2013, USAID obligated $13.3 billion for Afghanistan’s reconstruction. Unlike the State Department, which doled out 69 percent of its funds to just one recipient, DynCorp International, USAID is distributing the money more widely. The largest recipient, the World Bank, claims 13 percent of the total ($1.7 billion), followed by the nonprofit International Relief and Development, with 8 percent ($1.06 billion).

USAID is also less dependent on contracts than the State Department. State has obligated 90 percent of its reconstruction funding through contracts, while USAID has obligated only 51 percent. The largest of USAID’s contractors is a joint venture between construction firms Louis Berger Group and Black & Veatch Special Projects. The joint venture was awarded $1.05 billion, and the companies were individually awarded an additional $929 million.

The Louis Berger Group has landed contracts for some of the largest infrastructure projects in Afghanistan and Iraq. It has also landed in big trouble while working on those projects. Former Wartime Contracting Commissioner Charles Tiefer famously nicknamed Louis Berger Group and four other major reconstruction contractors (KBR, Agility, Tamimi Global Company, and First Kuwaiti Trading & Contracting) the “Flagrant Five” for their poor performance and numerous legal scrapes.

In 2010, Louis Berger Group paid $69.3 million to resolve civil and criminal charges of defrauding the government on reconstruction contracts with USAID and the Department of Defense by falsely inflating overhead costs. The deal included $18.7 million in criminal penalties and a deferred prosecution agreement, a $50.6 million civil False Claims Act settlement, and an administrative agreement with USAID. In addition, three former Louis Berger Group executives, including ex-CEO Derish Wolff, were criminally charged for their role in the fraud scheme.

USAID spending in Afghanistan may be diverse, but it is also extremely vulnerable to fraud, waste, and abuse. In January, SIGAR issued a report finding that $1.6 billion in USAID direct assistance to the Afghan government is at high risk of loss through corruption. SIGAR has also highlighted USAID’s continuing problems with overseeing contractors and ensuring the Afghan government can sustain U.S.-funded programs and infrastructure after we leave.

Still to come is SIGAR’s fiscal’s analysis of the agency with the largest stake in the reconstruction—the Department of Defense, with approximately $66 billion in obligated funds. We will blog about it when it becomes available.