Iraq reconstruction chief has $7 billion to spend
The U.S. official leading the reconstruction of Iraq "is sitting on a bank account of $7 billion" in various funds, including assets of the former Iraqi regime, and exerts significant influence on the scope of rebuilding projects and decisions on which ones receive funding, according to a senior Pentagon official.
The Baghdad-based Office of the Coalition Provisional Authority (OCPA), led by Ambassador Paul Bremer, gets its money from a variety of sources, according to Raymond DuBois, a member of the Defense Department's Iraq policy group, who spoke at a reconstruction conference in Washington Tuesday evening.
About $3.1 billion in Iraq funds has come directly from Congress, DuBois said. Another $1 billion has been placed as a "down payment" into a development fund being set up for projects that will eventually absorb monies from the U.N. oil-for-food program, which will end in six months.
But much of the money is drawn from billions of dollars in assets of the former Iraqi regime. The U.S. now controls those assets, DuBois said. Defense officials have said they include about $800 million in seized assets that coalition forces found in Iraq, some in the form of American currency squirreled away inside the walls of official buildings.
In addition, the U.S. government has frozen $1.7 billion in so-called "vested" assets, funds once controlled by Saddam Hussein's regime that now are being used for development work in Iraq. All this money is under Bremer's authority, DuBois said.
More money will flow into Bremer's account as the Iraqi oil industry revs up, DuBois said. Oil sales will fund much of the future work and should be tapped to pay Iraq's foreign debts, according to development experts and government officials.
While Bremer's office is directly connected to the Pentagon policy group, Bremer retains authority to control funds. Some of the money under his purview is exempt from federal acquisition regulations, so it can be awarded to contractors without full competitions.
Some reconstruction contracts have been awarded without competition to large companies with strong administration connections, creating a political controversy that has dogged rebuilding efforts. The Army Corps of Engineers has come under fire from some lawmakers for awarding a no-bid contract to engineering firm Kellogg, Brown & Root to extinguish oil well fires in Iraq and to get the country's oil industry back on its feet. KBR is a subsidiary of Halliburton, the company Vice President Dick Cheney led after he stepped down as Defense Secretary in the early 1990s.
Bremer's office appears eager to avoid the kind of firestorm the KBR contract has inspired. DuBois said he met Tuesday with officials from the Defense Contract Audit Agency and the Office of Management and Budget, and they agreed they would "retroactively evaluate" some contracts that already have been let. DuBois didn't mention the contracts by name.
Bremer's office may soon have its first opportunity to conduct a full and open competition. Within a few weeks, OCPA will devote some "upfront money" to a telecommunications contract, DuBois said. He didn't elaborate on the requirements of that contract, but administration officials have said on several occasions that a modern telecom infrastructure is a fundamental piece of the long-term reconstruction. MCI, the telecom giant now trying to recover from bankruptcy, is already building a small mobile phone network in Baghdad.
If Bremer's office uses the nearly $1 billion in seized assets to fund telecom work, the contract need not be competed, because that money is exempt from federal acquisition rules, DuBois said. Nevertheless, DuBois said the contract "probably" would be competed.
However, it's unlikely that any substantive work would begin quickly. Baghdad is still gripped by violence, and U.S. companies working there are "just scratching the surface" of what needs to be done, said David Young, an official with the Defense Contract Management Agency, who returned from the Iraqi capital this week.
Young was pessimistic that, despite the huge sum of money available to Bremer, much progress would be made quickly. Contractors are only working in about a quarter of the city, Young said. "The security conditions just aren't ready," he said. "Things are not settled enough."