- The Washington Times - Tuesday, January 6, 2004

The Bush administration yesterday opened the spigot on $18.6 billion in U.S. reconstruction funds for Iraq, awarding San Francisco-based Bechtel National a contract worth up to $1.8 billion to rebuild the country’s power grid, water system and other public works.

Congress last year approved the multibillion-dollar funding package for Iraq’s stabilization and reconstruction. International donors have also pledged $13 billion to help Iraq, a country ravaged by years of neglect under Saddam Hussein and further battered by military invasion and subsequent looting.

Bechtel has been one of the biggest corporate winners as the U.S. government funds projects in Iraq. The firm last year won what was then the biggest U.S. Agency for International Development contract, originally worth up to $680 million and later expanded by up to $350 million.

The contracting process has come under severe criticism from some legislators and watchdog groups, who have complained of limited competition and potentially improper connections between companies that have won awards and the Bush administration. Bechtel has contributed heavily to Republican election campaigns, and top officials have ties to the Bush administration.

Another firm with administration ties, Houston-based Halliburton Co., also has come under scrutiny for contracts in Iraq. The Army Corps of Engineers awarded Halliburton subsidiary Kellogg, Brown & Root contracts worth $2.26 billion through mid-December to restart Iraqi oil production. Vice President Dick Cheney was Halliburton’s chief executive before joining George W. Bush’s campaign for the presidency.

Pentagon auditors have said KBR may have overcharged the Army by $67 million for fuel delivered to Iraq between April and October. The audit is continuing.

Companies contracting with USAID in Iraq have not been accused of any improprieties, though the bidding process has drawn complaints.

Bidding on the contract announced yesterday was open only to American firms. Bechtel submitted a bid together with Pasadena, Calif.-based Parsons Corp. to beat out two other rivals, USAID said.

USAID officials said the award was made strictly on merit.

“I don’t see Bechtel as having any particular advantage or disadvantage,” said Tim Beans, director of procurement for USAID.

The Pentagon yesterday also announced plans to open bidding on an additional 17 contracts worth $5 billion. Retired Navy Adm. David Nash, who oversees reconstruction contracts for the U.S.-led Coalition Provisional Authority, said they would likely be awarded in the first part of March.

Mr. Nash said the CPA, which reports to the Pentagon, was holding $4.6 billion of the $18.6 billion for future reconstruction work, which would be identified as the situation in Iraq unfolds.

A report by the White House’s Office of Management and Budget yesterday outlined other spending priorities, including security and law enforcement, institution building, oil projects, health care and education.

The procurement process has been delayed as the State Department (which oversees USAID), the Defense Department and other agencies battle over the funds and as the administration outlines project priorities.

The reconstruction projects are part of a complex effort led by the CPA, headed by L. Paul Bremer, to stabilize the country and transfer power to Iraqis by the end of June.

Mr. Beans and Andrew Natsios, USAID’s administrator, said Mr. Bremer is setting reconstruction priorities, with input from Iraq’s government ministries, for all agencies involved in reconstruction.

It is still not clear which agencies — the CPA, the Pentagon, USAID or the Army, which is handling oil-related contracts — will oversee some of the remaining reconstruction work.

“Are there disagreements over details? Yes, there are, but I have to tell you: I think sometimes they are a little exaggerated,” Mr. Natsios said.

While the USAID contract was limited to U.S. firms, the Pentagon contracts will be open to a wider range of countries that supported the U.S.-led invasion of Iraq. France, Germany and other war opponents are not allowed to bid, though the list may be revised, a senior adminstration official said yesterday at the Pentagon.

USAID officials said subcontracts, which can cover the majority of the award, are open to all but a handful of nations forbidden by federal regulations, such as Cuba and Libya.

Iraqi firms are expected to see much of the subcontracting work. Bechtel said as part of its first reconstruction contract, it had thus far awarded 122 of 162 subcontracts to Iraqi firms.

Bechtel’s latest contract will run through December 2005, well after Iraqis are expected to be running their own government.

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