Blackwater may have overcharged for Iraq work, audit finds

Lax oversight by the State Department appears to have allowed Blackwater to overcharge a nonprofit organization for security services in Iraq, according to a government audit released Thursday.

For five years, the Moyock, N.C.-based private military company, now known as Xe, held a no-bid contract to provide security for the Iraq operations of the International Republican Institute. The company lost the contract last year - along with a much larger contract with the State Department - after the Iraqi government canceled its license to do business in the country.

The institute "advances freedom and democracy worldwide by developing political parties, civic institutions, open elections, good governance and the rule of law," according to its website. Although it bills itself as nonpartisan, prominent Republicans occupy many of its leadership positions. Sen. John McCain, R-Ariz., is chairman of the board.

The organization is funded largely by government grants.

Over the three-year period from Oct. 1, 2005, to Sept. 30, 2008, the institute paid Blackwater $50 million - more than one-fifth of its budget - for security services, according to its most recent tax returns.

Since 2004, the State Department's Bureau of Democracy, Human Rights, and Labor has awarded the institute eight democracy-building grants totaling $131 million.

Auditors for the Special Inspector General for Iraq Reconstruction examined the largest of those, for $50 million.

There are no records to indicate that the institute conducted any analysis of the reasonableness of the security costs that Blackwater was charging, the auditors found.

The company lost its operating license last year over allegations of unprovoked killings of Iraqi civilians by Blackwater contractors.

The institute then opened up its security work to competitive bidding and replaced Blackwater with two other companies. The auditors found that those companies provided the same level and type of services for significantly less money.

For example, in January 2008, Blackwater charged $114,470, which included $120.11 per day for 30 Iraqi static security guards.

In February 2010, one of the successor companies, Ardan Energy Services, charged less than one-third of that amount, $33,120, for 34 guards who were paid $27 to $33 per day.

Lisa Gates, an institute spokeswoman, said the organization takes the auditors' findings seriously but defended the Blackwater contract.

"IRI believes that its prudent and reasonable approach on security is reflected in the fact that U.S. nongovernmental organizations that paid less for security suffered casualties and deaths, while IRI has not lost a single employee to violence in Iraq," she said in a statement.

The State Department still uses Xe's security services. Last month the company won a contract worth more than $120 million to protect U.S. consulates in Afghanistan.