U.S. Gives Bechtel a Major Contract in Rebuilding Iraq
The New York Times
April 18, 2003
By ELIZABETH BECKER and RICHARD A. OPPEL Jr.
WASHINGTON, April 17 - The Bush administration
awarded the Bechtel Group of San Francisco the first major contract today in a vast
reconstruction plan for Iraq that assigns no position of authority to the United Nations or Europe.
The contract, which was awarded by the United States Agency
for International Development, had set off a heated contest among some of the
nation's most politically connected construction concerns.
The award will initially pay Bechtel, a closely held
San Francisco company that posted $11.6 billion in revenue last year,
$34.6 million and could go
up to $680 million over 18 months.
But those amounts could be only a fraction of what it
costs to rebuild Iraq's airports, water and electric-power systems, roads and railroads.
The reconstruction of Iraq, a task that experts have
said could cost $25 billion to $100 billion, is part of a broad American-led effort to stabilize the
country and set up a new government.
The American taxpayer will pay the initial contract costs, but Iraqi
oil revenue is supposed to eventually pay for much of the reconstruction.
Since the fall of Saddam Hussein's government a week ago,
the Bush administration has effectively shut out the United Nations from any postwar
role in Iraq.
An American team led by retired Lt. Gen. Jay Garner will take
over the civilian administration of Iraq until an interim Iraqi authority is in place.
The Iraqis will then work with the World Bank
and the International Monetary Fund, institutions in which the United States enjoys wide influence,
to reshape the country.
"We are in control on the ground and creating facts
on the ground," said a senior administration official who declined to be identified. "Iraq will not
be put under a U.N. flag. The U.N. is not going to be a partner.
And right now, people don't have the stomach to make a theological fight over this."
The administration also opposes the return of United Nations weapons inspectors, senior officials said.
Debate began yesterday at the United Nations on whether to lift sanctions
against Iraq, which would end the United Nations' authority to oversee
the sale of Iraqi oil, to buy and distribute food, to inspect for weapons and to safeguard the border with Kuwait.
European governments still hope to extract more influence
for the United Nations in shaping postwar Iraq, in part to ensure greater involvement by
countries and organizations that are reluctant to work for a military occupation.
And some European companies are still hoping for a share of the
work, perhaps as subcontractors to Bechtel.
British companies are already upset at being cut out of the
most lucrative deals to rebuild postwar Iraq, and Prime Minister Tony Blair urged Mr.
Bush at a meeting earlier this month in Northern Ireland to grant the United
Nations a wider role in reconstruction.
But Mr. Bush has held firm to having the United States
play the dominant role, suggesting in comments after the meeting with Mr. Blair in Belfast
that United Nations agencies may assist with food, medicine
and other needs and that a United Nations special representative can provide political
advice.
Administration officials said it was important to give contracts
to American corporations, essentially leapfrogging over international groups, as a way
to demonstrate to the Iraqi people that the United States
is a liberator bringing economic prosperity and democratic institutions to their nation.
"We don't see the need for a U.N. operation at all - the Iraqi interim
authority will be the equivalent of a civilian U.N. administration," said the
senior administration official.
As the administration sketches out its postwar Iraqi plans, officials
say that the World Bank eventually can act as the neutral international body
that will be the accountant for oil revenues, replacing the United Nations,
which has overseen the oil-for-food program.
This would require the creation of an Iraqi authority that is accepted
by other nations and international organizations, including the United Nations.
It would also mean lifting United Nations sanctions, as proposed by President Bush on Wednesday, and unfreezing Iraqi assets.
Bechtel defeated a handful of other construction companies today to win the contract.
The contract covers virtually all the major projects in Iraq,
including two international and three domestic airports, ensuring potable water is
available, reconstructing electric power plants and building roads, railroads,
schools, hospitals and irrigation systems.
An initial priority is rebuilding Iraq's only deep-water port, the harbor at Umm Qasr,
where cargo is loaded on ships that travel down a waterway in
southern Iraq to the Persian Gulf.
While administration officials say the bidding was based solely
on which companies were most qualified to do the work and on the need for an
expedited selection and security clearances, the two-month process
drew complaints from Congressional Democrats, as well as British companies,
about secrecy and the decision to restrict bidding to a handful
of the largest United States construction companies.
The finalists had come down to Bechtel, which rebuilt Kuwaiti oil fields
after the 1991 Persian Gulf war, and a bid from the Parsons Corporation, an
employee-owned company in Pasadena, Calif., which is one
of Bechtel's largest rivals and which performed extensive postwar reconstruction work in
Bosnia and Kosovo.
Parsons's bid included a major role as a subcontractor
for Halliburton's Kellogg Brown & Root subsidiary, but Halliburton never bid on the work as a
prime contractor. Other companies invited to bid included the Fluor Corporation, the Louis Berger Group and Washington Group International.
For the Bush administration, there could be a down side to running
Iraq on United States authority. Reconstruction is estimated at $25 billion. The
war has cost more than $20 billion so far, and Pentagon officials
are projecting costs of $2 billion a month through Sept. 30. There is also the
question of being seen as an occupying power with an agenda closer to American than Iraqi interests.
Jean Marie Guehenno, the United Nations under secretary
for peacekeeping operations, said that no matter who was in charge, "the problem is to
create a system that is seen as legitimate by Iraqis and the world."
"You have to be transparent and show you do not represent
a foreign national agenda," he said. Bush administration officials have emphasized that
foreign companies are eligible to become subcontractors for the work in Iraq.
Earlier this week, the State Department called in diplomats from Arab
countries and informed them that this construction contract would be
announced this week and encouraged them to begin preparing bids for the
subcontracting jobs.
Frances D. Cook, a former United States ambassador to Oman
who represents a consortium of Arab companies, said Bechtel would be wise to
consider awarding subcontracting work to companies from the region.
"There is both a political usefulness and cultural appropriateness
to using Arab companies from countries that helped us and want the jobs," said
Ms. Cook. "It will help our country the most and start to repair
some of the relationships in the region." A Bechtel spokesman said tonight that there
would be a "full and open competition on an international basis" for subcontractors.
The contract is one of several that had drawn criticism from lawmakers,
including Representatives Henry A. Waxman of California and John D.
Dingell of Michigan, the ranking Democrats on the Government Reform
and Energy and Commerce committees. The lawmakers had demanded an
investigation by the General Accounting Office into how the contracts were awarded.
Now, the G.A.O. plans an even wider investigation than
what had been requested. It will include an overall review of all matters relating to postwar
reconstruction in Iraq, said Jeff Nelligan, spokesman for the G.A.O.
"We will not be targeting any particular companies, but no company will be off of
our radar screen," Mr. Nelligan said.
Just this week, the United States Army Corps of Engineers
said it would send out for competitive bids on a new contract to fight continuing oil field
fires and rebuild Iraqi oil fields, a job initially awarded to Halliburton in a separate
contract without seeking any other bids. Halliburton is giant
Texas company that had been run by Vice President Dick Cheney until he quit to run for vice president.
The Bush administration has denied that politics played
any role in the awarding of any contract for postwar Iraq. All decisions have been made on
the merits, administration officials say.
"The White House hasn't made any decisions to exclude
countries or companies on awarding contracts," Michael Anton, a spokesman for the
National Security Council, said today.
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