TAJI, Iraq (Reuters) – The Iraqi insurgency is damaging U.S. army efforts to leave an impressive array of reconstruction behind as its presence recedes in Iraq, the military says.

The U.S. Army Corps of Engineers, responsible for carrying out some $18.4 billion worth of planned projects across the country, says up to 25 percent of that aid has gone on security to face down relentless violence and sabotage.

Poor electricity and water supply, two of the issues sapping public confidence in the U.S.-backed government, have been directly affected by the unplanned-for redirection of cash, Brigadier-General Bill McCoy said this week.

&#34Security increases costs by 10-25 percent, so we”re not getting our value for money. Security was factored in at a rate of 9 percent — we didn”t know it would be this much,&#34 he said on a tour of projects at Taji military base north of Baghdad.

&#34We”ve had to downsize in some areas. It took $3 billion out of water and $500 million out of electricity,&#34 he said.

Protests have flared in a number of cities over the state of public services, which have largely failed to recover following the destruction wrought by the U.S.-led invasion two years ago.

U.S. officials say they want to direct more of the more than $18 billion pledged by Washington for reconstruction to Iraqi contractors, after U.S. firms like Halliburton won huge deals that sparked accusations of commercial colonialism.

At least 30 percent of money slated for the central Iraq region is being spent inside the Taji base, which 13,000 U.S. troops say they will eventually hand over to 15,000 Iraqi army soldiers currently in training there.

It includes a military hospital, an army barracks, an auditorium, and a $2 million power plant which U.S. military officials fear the Iraqis lack the expertise to maintain alone.

One cited an example of water gone septic when workers switched off systems overnight at a southern treatment plant.

Iraqis at the Qudas power station in Taji will undergo 10 days of training when work is complete in September — though building problems mean it is running on oil and diesel instead of natural gas as planned.

One major Iraqi contractor said he was glad to have American help and doubted the Iraqi authorities would have been in a position to handle the reconstruction process without it.

&#34You need the outside factor to do all this,&#34 said Namir al-Ekabi of Almco, a family firm which is building the massive Sadr City water treatment plant in Baghdad.

&#34There is too much corruption in the Iraqi government and they will never teach you safety and quality. We are being reeducated,&#34 he said outside the half-built Taji auditorium.

Namir and his four brothers were waiting in Jordan to set up their company, which he says has made &#34millions of dollars&#34 from U.S.-granted contracts, as soon as the U.S. invasion was over.

&#34Jihad (holy struggle) is all about the guy who sweats all day and rebuilds the country against all odds,&#34 he said, adding that insurgents have killed 36 Almco employees around Iraq.

But not all Iraqis involved in reconstruction are so enthusiastic about the U.S.-fostered transfer of knowledge to a country that was proud of how it rebuilt itself during the period of U.N. sanctions after the 1991 Gulf war.

With McCoy and his team looking on, an Iraqi army officer overseeing new recruits training in the use of bulldozers bought from Japan bristled at the idea that Iraqis did not know how to operate them.

&#34It”s just the new generation that doesn”t know how to use these, but we have experts from the old army who can teach them,&#34 he says. &#34And these bulldozers aren”t new. We got them before, in Saddam”s time.&#34