Page 260 - Global Project Management Handbook

LESSONS LEARNED: REBUILDING IRAQ IN 2004 12-21

Cost-Plus Contracting
The major focus of the reconstruction program was speed so as to get projects started,
employee Iraqis, and thereby win the hearts and minds of the Iraqi people. While
facilitating speed, cost-plus contracting created some other issues.
● The PCO was under pressure to obligate as much money as possible to contractors
because money obligated was a measure of progress. However, when starting pro-
jects with undefined scopes, budgets, and schedules, it is prudent to obligate, say,
20 percent of the project funds. This initial funding would be used to definitize the
project scope, schedule, and budget. Only at such time that the project is fully
definitized should the remainder of the project funds be obligated or released. Also,
by coupling an award fee to meeting the defined project scope, budget, and schedule,
the project can be turned into a pseudo-fixed-price contract.
● With cost-plus contracts, the role of the contracting officer because more important, and
this could and sometimes did have a negative impact on the authority and effectiveness
of the project manager.
● Cost-plus contracts bring the baggage of many audits and many reports.
● Cost-plus contracting tends to place all the project risk on the owner, in this case the gov-
ernment. Ideally, once a project is definitized, some project risk should shift to the DB
contractor.

Personnel
Personnel turnover was a problem. The contractor’s model of signing people to one-
year agreements with liberal R&R benefits and a substantial completion bonus at the
end of the year was a more effective model than the government’s approach of limited
R&R and average tour lengths of about six months.

Program Definition

As designed by Congress in Public Law 106-08, the reconstruction program was to be
implemented by large coalition engineering and DB firms, and the Iraqi ministers
were to select and approve all projects. This created some issues.
● In hindsight, two programs should have been defined: (1) a program of large-scale
infrastructure projects that were defined in Baghdad and (2) a program of smaller pro-
jects where the project selection was done on a city-by-city basis by local city officials.
● Working through large DB firms to execute small projects such as fire or police station
rehab projects is not cost-effective. In fact, most likely every city in the world will hire
smaller, local contractors to do small, local projects.
● All programs must be flexible. Day one when any program or project starts, things
change, and adjustments must be made. In the case of Iraq, the absence of community-
based programs was quickly apparent, but using the same organizational structure and
using Iraqi oil money for funding, a community-based program was quickly built to sup-
plement the IRRF II program.