A watchdog's report released Sunday slammed US efforts to build a sewage treatment plant in the insurgent bastion of Fallujah, Iraq, saying the project was years delayed and millions of dollars over-budget.

The audit from the US Special Inspector General for Iraq Reconstruction (SIGIR), which highlighted the project as a case study for reconstruction efforts, comes with barely two months to go before all US troops must withdraw from Iraq.

The plant was initially set to cost $35 million (24.7 million euros) to service 100,000 residents and be completed by February 2006. Thus far, it has cost $107.9 million and services just 38,400 people, with Iraq set to commit a further $87 million before it is finally due to be finished in 2014.

"Heavy fighting in Fallujah, poor planning, unrealistic cost estimates, and inadequate funding led to significant cost-overruns and delays in constructing the city's new wastewater treatment system," the report said.

SIGIR noted that security was so poor in Fallujah, where US forces fought two bloody battles in 2004, that the project was put on hold, new trenches and pipes were targets for attacks, employees were kidnapped and intimidated, and US troops carried out onerous searches of convoys that led to delays.

"It is clear that US officials did not fully appreciate Fallujah's security environment and the impact it would have on (the main contractor) FluorAMEC's ability to design and construct the wastewater treatment system," SIGIR said.

The watchdog added that, at the time the contract was awarded, US officials had little knowledge of the infrastructure and environment of the city and were unable to visit to conduct site surveys, leading to unrealistic cost estimates and projected timeframes.

As time went on and costs increased, meanwhile, promised funding often did not materialise, causing contractors to stop work, SIGIR said. It added that US officials did not adequately consult with the Iraqi government, leading to major re-designs years into the project schedule.

"In the end, it would be dubious to conclude that this project helped stabilise the city, enhanced the local citizenry's faith in government, built local service capacity, won hearts or minds, or stimulated the economy," the report said.

"Coupled with the fact that the outcome achieved was a wastewater treatment system operating at levels far below what was anticipated, it is difficult to conclude that the project was worth the $100 million investment and the many lives lost."

The 39,000 troops currently stationed in Iraq must withdraw by the end of the year, according to the terms of a bilateral security agreement. On October 21, US President Barack Obama confirmed that all American soldiers will leave by year-end.