The reconstruction of Iraq is fraught with problems but rich in potential.
Rebuilding power stations, water treatment and sewage plants, airports, roads and other infrastructure facilities will cost at least $25 billion in funding from all sources, including revenues from Iraqi oil, according to some estimates. Others put the figure much higher.
The United States, rather than the United Nations, will direct the reconstruction, which is under Lt. Gen. Jay M. Garner (retired), 65, whose Army experience includes the strategic hamlet program in the Vietnam War.
President Bush appointed Garner last January to head the new Office of Reconstruction and Humanitarian Assistance, which oversees aid, reconstruction and civil government in Iraq. Congress authorized $2.4 billion for this work the second week of April.
Reconstructing Iraq will be the first time since World War II that the United States has rebuilt a defeated nation on its own, without major assistance from other countries.
A friend of Defense Secretary Donald H. Rumsfeld, Garner reports to Gen. Tommy R. Franks, commanding general of the U.S. Central Command, which includes Iraq.
After arriving in Kuwait in mid-April, Garner, who has a staff of 500 people, suggested that Iraq could be the richest country in the Middle East within a few years, after reconstruction is completed.
“In the next few years, they [the Iraqis] will be able to double, triple their production of oil,” he said.
Garner’s team is responsible for the civilian administration of Iraq. The United States hopes that a transitional Iraqi authority also will be in place by the end of May as a step toward drafting a new constitution in two or three years, and the election of a permanent Iraqi government.
In U.S. plans, greater sales of Iraqi oil by a new, more democratic, Iraqi government would help pay for the reconstruction in a few years.
Bush has called on the United Nations (U.N.) to lift its economic sanctions on Iraq. This would end the U.N.’s Oil-for-Food Program, which the United Nations created to provide wheat flour, baby formula, powdered milk, soap to the Iraqi people, and “free up” the oil.
The U.N.’s authorization of approximately $14 billion for emergency food and medical aid from the program expires on May 12. (In the Oil for Food Program, which was suspended when the war began, Saddam Hussein’s Iraqi government contracted for the food, which about 60 percent of the population purchased at 44,336 corner stores with coupons issued by the government and the United Nations. Russia was Iraq’s chief trading partner in this program [$7.3 billion in oil and other purchases], followed by Egypt [$4.3 billion] and France [$3.7 billion].)
Besides undertaking an immense reconstruction effort, the United States will provide 590,000 metric tons of food, worth more than $435 million, to feed the people of Iraq through the U.S. Agency for International Development (USAID). In addition to this food relief, USAID is spending more than $246 million on humanitarian relief to Iraq through the Red Cross and other organizations.
Reconstruction
The reconstruction effort is part of a Bush Administration strategy to transform Iraq into a model of democratic capitalism in the Middle East. A transitional Iraqi authority would work with the World Bank and the International Monetary Fund rather than the United Nations. The World Bank, for instance, would keep track of oil revenues.
USAID, an agency of the U.S. Department of State, is awarding and administering Iraq reconstruction contracts as the government’s first responder to foreign emergencies, disasters and humanitarian crises.
Lew Lucke, mission director of USAID’s Iraq operation, reports to Garner as well as USAID Administrator Andrew Natsios in Washington. This is a different arrangement from reconstruction of Afghanistan, where the USAID mission director reports to the U.S. Ambassador in Kabul as well as to AID administrator Andrew Natsios, but there is no U.S. Ambassador to Iraq at this point.
Newspaper accounts have said that the Iraq arrangement reflects Pentagon dominance over the reconstruction and a growing rift between the military and the more-moderate Department of State.
Lt. Gen. David McKiernan, the commander of ground forces in Iraq, is providing the security to enable the rebuilding.
USAID issued nine procurement actions — eight Requests for Proposals (RFPs) and one Request for Applications (RFA) — between Jan. 31 and March 4 for reconstruction work in Iraq. It has awarded prime contracts for six of the RFPs after closed limited-competition bidding among a handful of U.S. firms who were invited to respond.
The RFPs were issued well before the United States and its coalition partners invaded Iraq rather than follow the more-lengthy U.N. inspection process.
The USAID Web site (usaid.gov/iraq) says the agency realized that “It could very well be called upon at any time to deliver assistance rapidly in order to meet various contingencies,” and “decided to undertake specific procurement planning actions.” It says it “did not want to do anything that might have complicated diplomatic efforts to prevent war,” adding: “Therefore, contract negotiations had to be conducted on a sensitive and expedited basis.”
The RFPs went to 21 selected U.S. (no foreign) companies.
The awards, which USAID said were “through the competitive procurement process,” were announced less than two months after the RFPs. They are as follows:
• Bechtel National Inc., the government services business unit of the Bechtel Group in San Francisco, CA, (initial contract of $34.6 million, with a potential of up to $680 million over 18 months for emergency repair and rehabilitation),
• Stevedoring Services of America, Seattle, WA, ($4.8 million annually for operating the southern port of Umm Qasr, including cargo handling, to efficiently deliver food and other materials),
• Research Triangle Institute, NC, ($7.9 million annually, up to $167.9 million over 12 months, to promote Iraqi local government participation in Iraq’s post-conflict reconstruction),
• Creative Associates International Inc., Washington, D.C., ($62 million over 12 months to address immediate primary and secondary educational needs and promote participation of the Iraqi people in a sustainable decentralized educational system). USAID said that “The U.S. government’s goal is to ensure that children are prepared for the new school year beginning in September, 2003.”
• International Resources Group, Arlington, VA, (An initial $7.1 million for personnel “to support the rapid scaling up of the reconstruction planning effort”). This was the only one of the first eight contracts to be sole-sourced. USAID said this was because “IRG has a two decade-plus record of work with USAID and with international development agencies in more than 120 countries.”
• The Air Force Augmentation Program ($4 million annually, up to $26 million over 12 months, for a broad range of logistical support services to USAID and its Iraq reconstruction contractors, including such activities as warehousing). This program is a pre-existing arrangement for supporting and supplementing existing Air Force contracts.
• Abt Associates, Cambridge, MA, (an initial $10 million “to ensure the normalization of health services in Iraq while strengthening the overall health system in the country.”) This contract, announced April 30, will support Iraqi-led initiatives and will include supporting a reformed Iraqi Ministry of Health at the national, regional and local levels. Assistance also will include delivering health services and medical equipment.
The last of the eight prime contracts is expected to be awarded in the near future. This will be for managing repair of civilian airports to expedite humanitarian assistance and reconstruction.
Explaining the awards being awarded only to U.S. firms, the Web site says: “Existing U.S. foreign assistance law establishes a preference for U.S. firms,” adding that it chose to limit competition to certain U.S. companies “who could move forward quickly with proven technical capability.”
The Web site says the prime contractors “will be free to choose the best combination of U.S. and foreign companies as subcontractors in order to fulfill contractual requirements.”
Luke Zahner, a spokesperson of USAID in Washington, D.C., told Construction Equipment Guide (CEG) that the contractual work is still in the very early stages, and that security, while still a concern, “is gradually improving” and is generally good in Southern Iraq.
“Contractors are not simply entering Iraq and going where they please,” he added. “Everything is very carefully coordinated through USAID.”
Of Lucke’s reporting to Garner, Zahner said: “We are accustomed to our mission directors in the field reporting also to the ambassadors. It’s not unusual for us to have a situation where you have dual reporting mechanisms. What’s unusual for us in these circumstances is simply the fact that we don’t have an embassy.”
An award is still pending on the request for applications, which is for a community action program promoting “diverse and representative citizen participation in and among communities throughout Iraq.”
USAID also awarded three grants:
• $1 million for one year initially, up to $7 million, to the United Nations Children’s Fund (UNICEF) to promote a “Back to School” campaign for the approximately 25 percent of Iraqi children not in primary school;
• $8 million for one year initially, up to $40 million, to the United Nations Children’s Fund (UNICEF) to restore basic health services to the most vulnerable populations, focusing on women and children, and support primary health care services;
• $10 million for one year to the World Health Organization to identify crucial immediate and short-term health care needs of the Iraqi population and restore essential health services.
Bechtel Contract
Tom Hash, president of Bechtel National Inc., said his company has started detailed planning on its infrastructure reconstruction program for Iraq, which will “assist in rebuilding schools, hospitals, water and wastewater facilities, irrigation systems, electrical power systems, ports, airports, roads, bridges and railroads.”
Bechtel’s capital construction contract responsibilities include design, rehabilitation, upgrading, reconstruction and construction. The project will include two international and three domestic airports, electrical grids as well as power generation facilities, and dredging, repair and upgrading of the Umm Qasr port.
Bechtel, which rebuilt the Kuwaiti oil fields after the 1991 Persian Gulf War, beat out Parsons Corp., the Fluor Corp., the Louis Berger Group, and Washington Group International, and two other contractors.
Bechtel is already helping prepare Umm Qasr for the immense relief supplies that will be shipped in. A Bechtel survey ship arrived at the port on April 28. Marines who have done preliminary surveys will remain to assist. A Bechtel dredging ship also is joining the priority effort to facilitate humanitarian aid.
“The next priority will be restoring Iraq’s power infrastructure,” said Steve Naventi, a spokesperson of Bechtel National. “Our engineers met in Basra on April 28 with USAID and Iraqi power plant managers for the southern region of Iraq. Their discussions centered on priorities and immediate needs. The meeting was very positive, with Iraqis welcoming U.S. officials. The immediate priorities include reconstruction of the 400 kb line, telecommunications equipment and power supplies to water supply plants. Our engineers and USAID personnel are also conducting field evaluations of power lines and towers.”
Naventi said reconstruction and rehabilitation of drinking water supply plants is actually an equally high priority with power.
“We’re planning to mobilize 20 to 30 more people in the region, first in Kuwait and then on to Iraq,” he said, adding: “It’s too early in the process to tell how many people we will eventually have there. We are planning to use as many Iraqis as possible for the work.”
Naventi said Bechtel will hold subcontractor information meetings in the United States, the United Kingdom, and Kuwait in mid-May, adding: “Right now, subcontractors from around the world are registering, and we are encouraging others to register via our Web site [www.bechtel.com] where we have a dedicated procurement page for them. Thousands of subcontractors from around the world have already registered. We’ve really been busy mobilizing, getting people to Washington to meet with AID, and getting them over to the region. Right now, we’re really in the early process.”
Bechtel has mobilized Great Lakes Dredge and Dock Co. of Chicago, IL, to provide surveying services, prepositioning and emergency dredging at Umm Qasr, as named in its contract proposal. Naventi said further dredging also is anticipated, including dredging the shipping channel to the Persian Gulf. Subcontracts for this work will be awarded through competitive bidding.
Bechtel announced on April 30, that it is in the process of awarding its first two subcontracts. Olive Security will provide security services during prepositioning and fact-finding phases to help ensure safety of Bechtel personnel. ArmorGroup Services (Jersey) Ltd. will provide advisory services in the area of unexploded ordnance. No dollar amounts for the contracts were available.
Naventi told CEG Bechtel has chosen its project leaders for Iraq, with the choices currently being reviewed by USAID.
Alison Abbott, another Bechtel National spokesperson, said the initial $34.6-million work order covers priority work at Umm Qasr and the power, water and sewage systems.
“The survey ship is in and we have divers who will search for explosives and mines to make sure it’s safe for workers to go in there,” she said. “A top priority at the port also will be to dredge the area so that we can get food in.”
“The way it will work is we will receive additional work orders of a certain value tied to specific projects,” Abbott added. “We’re working very closely with USAID to prioritize and detail and scope out the work. The majority of the work will probably be subcontracted out.”
Abbott said the initial $34.6-million work order “is actually quite small compared with many of our contracts, while the total of $680 million is probably average; we work on projects which are valued in the billions of dollars.”
Abbott said Bechtel “has a history of 105 years of doing very complex work and we certainly have a long history of doing work in the Middle East, including a dam in Iraq.”
Critics have said Bechtel has close ties to Republican Administrations, possibly giving it an inside track. Abbott responds:
“If you check with AID, you see that the process was independent, through a competitive bid, and that we had a proposal that met their needs.”
She said Bechtel’s subcontracting process “will be an open competition with an international competitive bidding process which will fall under the Federal Acquisition Regulations, and all qualified contractors will be invited to bid.”
Asked about procurement of equipment, Abbott pointed out that Bechtel will probably work through its equipment company, Bechtel Equipment Operators, based in Louisville, KY, which leases construction equipment and has $400 million in assets.
Bechtel received a contract from the Iraq Petroleum Company in 1950 to build a 556-mile crude oil pipeline between Kirkuk in northeastern Iraq and Baniyas in Syria.
George Shultz, secretary of state under President Reagan, serves on Bechtel’s board of directors.
Parsons Corp. has confirmed that it was second finalist in the bidding. Parsons had identified the Kellogg Brown & Root unit of Halliburton as a subcontractor. Vice President Dick Cheney was chief executive officer of Halliburton until 2000.
The TV program “60 Minutes” said in a recent news segment that Kellogg Brown & Root received a non-competitive-bid contract to develop plans to restore Iraq’s oil infrastructure if they were set afire.
Meanwhile The New Yorker magazine ran a piece saying that the estranged family of terrorist Osama bin Laden invested $10 million in the Fremont Group, San Francisco, CA, which was a Bechtel investment subsidiary until 1986. Fremont’s majority ownership is the Bechtel family and five of its directors, including Shultz, also are directors of Bechtel.
Costs of War
The war in Iraq has cost thousands of lives, with a financial toll of an estimated $20 billion, plus an expected $2 billion a month through Sept. 30.
Rebuilding is reminiscent of post-World War II reconstruction of West Germany and Japan. West Germany had a multinational interim government, with four zones of occupation. A new constitution brought elections and full sovereignty by 1954. In Japan, the United States controlled the interim government under temporary U.S. control. A new constitution was written; the emperor was relegated to symbolic status, and democracy bloomed.
With its many factions, including militant Islamic clerics and Arab nationalists, Iraq poses an entirely different challenge. Will building a democratic nation in the Middle East be possible as the United States, on its own, builds a new infrastructure, health system and schools?
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