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Viewing cable 08HILLAH40, KARBALA PRDC PROCESS OVERVIEW AND ISSUES

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Reference ID Created Released Classification Origin
08HILLAH40 2008-04-07 09:15 2011-08-24 16:30 UNCLASSIFIED//FOR OFFICIAL USE ONLY REO Hillah
VZCZCXRO4921
RR RUEHIHL
DE RUEHIHL #0040/01 0980915
ZNR UUUUU ZZH
R 070915Z APR 08
FM REO HILLAH
INFO RUEHGB/AMEMBASSY BAGHDAD 0915
RUEHIHL/REO HILLAH 1127
UNCLAS SECTION 01 OF 02 HILLAH 000040 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV PREL EINV IZ
SUBJECT: KARBALA PRDC PROCESS OVERVIEW AND ISSUES 
 
1.  (SBU) SUMMARY:  The Governor of Karbala Province has asked 
the PRT for greater Iraqi control over the PRDC process by which 
most U.S. funded projects in the Province are executed.  The PRT 
sees substantial benefits to the overall U.S. mission that could 
be obtained from increased Iraqi control of U.S. funds allocated 
for construction in the province, provided that increased Iraqi 
control of U.S. funds is coupled with increased PRT involvement 
in the Iraqi budget execution process. The PRDC process as it 
now operates in Karbala Province does little to support the key 
U.S. objective of developing Iraqi capacity to execute the Iraqi 
budget. The PRDC process is focused on proper execution of U.S. 
funded projects and offers limited means to impact the Iraqi 
provincial budget execution process.  The PRT would like to 
leverage increased Iraqi involvement in U.S. funded projects to 
enable the PRT to obtain a degree involvement in the Iraqi 
capital budget execution process.  As a way to achieve this, the 
PRT suggests conditional monetary grants to the Provincial 
Government under terms that would require PRT participation in 
the Provincial capital budget execution process. (End Summary) 
 
2.  (SBU) In mid-March, Karbala Provincial Governor Aqeel 
Al-Khazaely visited with the PRT TL at REO Hillah.  The Governor 
presented the PRT with a list of complaints regarding the PRDC 
process.  The key points mentioned in the Governor's two page 
list of issues include his requests for:  Iraqi involvement in 
the approval of contractors allowed to bid on U.S. funded 
projects, Iraqi involvement in the bid selection process; Iraqi 
approval of any progress payments on U.S. funded projects; and 
inclusion of Iraqi contract terms that will allow the Iraqis to 
pursue Iraqi contractors in Iraqi courts for deficient 
performance on contracts. 
 
3.  (SBU) In response to the Governor's concerns, the PRT 
conducted a review of the PRDC process in Karbala Province.  PRT 
Offs who attended Karbala PRDC meetings met with the Iraqis 
involved in that process, local and regional representatives of 
the U.S. Army Corps of Engineers (USACE) who oversee that 
process, and USACE representatives who have extensive, personal 
experience in working that process in Karbala Province. 
 
OVERVIEW OF THE KARBALA PRDC PROCESS 
- - - - -  - - - - - - - - - - - - - 
4.  (SBU) The PRDC process varies to some extent throughout 
South Central Iraq as to both the participants and the process. 
These differences appear to be primarily a result of Iraqi 
preferences and capabilities.   PRDC meetings in the South 
Central Provinces tend to occur about once every two weeks.  The 
attendees vary.  For Karbala, the PRDC attendees usually include 
the Governor's Assistant for Technical Affairs ("TA"), 
representatives of the directorates as selected by the TA, and 
an occasional appearance by a provincial council representative. 
  Until September of 2007, the PRDC meetings alternated with 
Sector Coordination Team (SCT) meetings.  The SCT meetings 
differ from the usual PRDC meetings in that the SCT focus is on 
technical issues related to ongoing projects.   Where the SCT 
process remains in use in South Central, the PRDC engagements 
relate primarily to the selection of new projects and similar 
policy issues as opposed to the project management efforts 
undertaken in the SCT meetings.  Beginning in about September, 
2007, the Karbala Governor's office began to exert greater 
control over DG involvement in PRDC and SCT meetings to the 
extent that SCT meetings were abandoned and all decisions, both 
policy and technical, are now controlled by the TA at the PRDC 
meetings.  The Governor himself has requested in writing that 
all PRT and USACE communications regarding USACE managed 
projects be directed to the TA and not to the Directorates or 
local Iraqi officials. 
 
NON-TRANSPARENT BUDGET EXECUTION PROCESS 
- - - - - - - - - - - - - - - - - - - - 
5.  (SBU) The Provincial Government's request for greater 
involvement in and even control over US funded projects does not 
at the present translate to greater US involvement in the Iraq 
funded projects.   The Iraqi process remains largely hidden from 
both the US and the Iraqi public.  At a recent PRT sponsored 
local media conference, a key complaint voiced by the Karbala 
media was the complete lack of transparency in the development 
and execution of the Provincial Capital Budget. 
 
LEVERAGING CONTROL FOR TRANSPARENCY 
- - - - - - - - - - - - - - - - - - 
6.  (SBU) PRT Offs see significant potential benefits to 
increased Iraqi control of US funded capital projects provided 
that control can be leveraged by the PRT to obtain US access to 
the Iraqi systems.  The cloak of invisibility that currently 
precludes PRT involvement in the Iraqi process is a major 
impediment to the PRT's efforts to enhance provincial budgetary 
execution. 
 
CONCERNS ABOUT IRAQI INVOLVMENTT IN THE US PROCESS 
- - - - - - -  - - - - - - - - - - - - - - - - - 
7.  (SBU) While the potential benefits of greater Iraqi 
involvement in the US contracting process are appreciated by the 
 
HILLAH 00000040  002 OF 002 
 
 
PRT, PRT Offs are concerned about the motivation behind the 
Iraqi's request.  PRT Offs have received numerous reports of 
corruption in the Iraqi capital budget execution process.  These 
reports come from the directorates, Iraqi contractors, media, 
elected officials, NGOs, and Iraqi citizens.   The general 
consensus appears to be that Iraqi control of any aspect of the 
contracting process expands the likelihood for extortion that 
undermines contract execution and construction quality by 
contractors forced to cut corners to make up for funds lost to 
bribes.  It also allows the Iraqi overseers to compel 
contractors to accept terms not included in the original 
contract terms and thereby undermines the willingness of 
qualified contractors to participate in the bids. 
 
LEGAL IMPEDEMENTS TO CHANGE 
- - - - - - - - - - - - - - 
8.  (SBU) PRT Offs recognize that at this stage of the US effort 
in Iraq, the emphasis must be on developing the Iraqi capacity 
rather than on actual construction.  PRT Offs have discussed 
with USACE the possibility of allowing some degree of Iraqi 
involvement in the US contracting process in exchange for 
greater US involvement in the Iraqi process.   It appears that 
Iraqi involvement in the bid solicitation and bid selection 
processes is not possible under US law for the projects managed 
by USACE.   The current process does allow for Iraqi input 
before progress payments are made.  Complaints presented to the 
PRT or USACE at PRDC meetings can be factored into USACE's 
decision to make progress payments, make final payment, or to 
blacklist a specific contractor.  The Iraqis, however, seek a 
level of control over the U.S. funded projects and not mere 
input.  The Iraqis seek monetary grants rather than completed 
projects. 
 
PREFERED SOLUTION 
- - - - - - - - - - - - - - 
9.  (SBU) The PRT's primary interest in extending Iraqi 
participation in the U.S. funding process is to leverage US 
contributions to gain access to and influence the Iraqi budget 
execution process.    If possible, PRT Offs would prefer to 
process certain U.S. funded projects through the Iraqi systems 
of bid solicitation, bid opening, bid evaluation, contract 
award, contract management, and contract oversight.  (The 
relevant Iraqi processes are established by written Regulations 
issued by the Iraq Minister of Finance and the Ministry of 
Planning and Development.)  In exchange for the Iraqi control, 
the PRT would require PRT oversight at each stage of that 
process as a precondition to US financial commitment to the 
projects.   That oversight would be used to gain greater PRT 
understanding of, involvement in, and influence over the Iraqi 
budget execution process.   Unconditional capital project grants 
have in the past been allocated to the province.  Unfortunately, 
without conditions to encourage transparency and legitimacy in 
the Iraqi process, such grants appear to further reinforce the 
existing, non-transparent Iraqi process. 
 
WAY FORWARD 
- - - - - - - - 
10.  (SBU) The PRDC process in Karbala does not currently 
support improvements in either the legislative or executive 
processes of Holy Karbala Province.  Absent any changes in the 
U.S. project funding process, the PRT will attempt to influence 
the provincial legislative process by requiring that all PRDC 
related projects be submitted for review and vote by the entire 
provincial council, with the independent media present at such 
meetings, and distribution of the record of that meeting to each 
District and Sub-district Council.  The PRT will also continue 
to talk to the Governor to encourage some level of PRT 
involvement in the Provincial budget execution process. 
 
11.  (SBU) COMMENT: The PRDC Process as it currently exists in 
Karbala Province is not capable of sufficiently enhancing the 
Iraqi capital budget execution processes.   The PRDC process 
appears to provide an excellent tool for the employment of US 
funds to further develop Iraq's infrastructure.  In its present 
state, however, it appears to do little to enhance the Iraqis' 
ability to use Iraqi money to rebuild Iraq. It would be helpful 
if U.S. funds directed to the provinces could be allocated in 
the form of conditional grants that would allow the PRT 
sufficient leverage to influence the Iraqi budget execution 
process. 
COOKE