This is something others have written about but it's worth mentioning again (and again). An excellent place to start is the Disinfopedia entry on war profiteering. It details some of the many problems with the "reconstruction" efforts in Iraq and the astoundingly low amount of money and resources that actually get to the Iraqi people. It seems to me a fairly obvious economic principle that each layer of intermediary between the disbursement of money and the end use of the money will require maintainance and "administrative" fees. The prevalence of no-bid contracts and the sometimes several layers deep of subcontractors is a recipe for bleeding funds into the companies on its way down. In retail operations, the standard markup of items for sale to consumers is between 50 and 100%. Apply this rule of thumb to money going to Iraq rebuilding and it doesn't take long to whittle the flow to a trickle at the end. Add to this fairly well documented instances of unbelievable waste and it's no surprise there are big problems. This is from CorpWatch:

In testimony submitted to members of Congress, one truck driver explained in detail how taxpayers were billed for empty trucks driven up and down Iraq and how $85,000 vehicles were abandoned for lack of spare tires. A labor foreman said dozens of workers were told to "look busy" while doing virtually no work for salaries of $80,000 a year. An auditor related how the company was spending an average of $100 for every single bag of laundry and $10,000 a month for company employees to stay in five-star hotels.

And this is from the Disinfopedia entry on war profiteering:

An "investigative team spent three weeks in Iraq visiting project sites, analyzing contracts, and interviewing dozens of administrators, contract workers, and U.S. officials. Among the findings:

Despite over eight months of work and billions of dollars spent, key pieces of Iraq’s infrastructure – power plants, telephone exchanges, and sewage and sanitation systems – have either not been repaired, or have been fixed so poorly that they don’t function.

San Francisco-based Bechtel has been given tens of millions to repair Iraq’s schools. Yet many haven’t been touched, and several schools that Bechtel claims to have repaired are in shambles. One 'repaired' school was overflowing with unflushed sewage; a teacher at the school also reported that 'the American contractors took away our Japanese fans and replaced them with Syrian fans that don’t work' – billing the U.S. government for the work.

Inflated overhead costs and a byzantine maze of sub-contracts have left little money for the everyday workers carrying out projects. In one contract for police operations, Iraqi guards received only 10% of the money allotted for their salaries; Indian cooks for Halliburton subsidiary Kellogg Brown and Root reported making just three dollars a day.