U.S. awards second Iraq reconstruction contract

The U.S.-led rebuilding of war-torn Iraq entered a second phase of sorts Tuesday, when the government awarded a new multibillion dollar reconstruction contract to engineering giant Bechtel National Inc. The company has been leading repairs to Iraq's damaged infrastructures and buildings since last year.

The U.S. Agency for International Development announced the $1.8 billion, two-year contract in a brief statement. Bechtel has been working under an 18-month, $680 million contract with the agency to repair bridges and roads, electrical power generators and grids, water and sewage systems, and airport facilities. The contract also calls for Bechtel to rebuild up to 100 hospitals and 6,000 schools, as well as various Iraqi ministry buildings. That work was awarded in April 2003.

The new contract, which AID has dubbed Iraq Infrastructure II, covers the same projects, and is essentially a continuation of the reconstruction work that has been hampered by ongoing violence since the fall of the Iraqi regime. U.S. contractors and their employees have been targeted by insurgent forces in Iraq, who also have killed hundreds of U.S. and coalition forces since the war began in March 2003. Work is scheduled to begin immediately.

In a year-end wrap up of Bechtel's rebuilding work in Iraq, Robert H. Ragan, manager of Bechtel's Washington office, said the company has "completed all major work" to reopen the Port of Umm Qasr in southern Iraq. The second Iraq contract calls for additional dredging, repair and upgrading of the seaport.

Also, Ragan said, Bechtel has helped restore electricity generation to prewar levels, and is making progress toward increasing those levels by this summer. He also noted that, as of mid-December, the company had awarded 122 subcontracts to 102 Iraqi companies and had employed more than 35,000 Iraqis in the course of reconstruction work.

Ragan also said that Bechtel had "initially completed" the rehabilitation of 1,239 schools in 14 urban areas. Some Bechtel-rebuilt schools have been looted, and Iraqi citizens, company employees report, have frequently stoned Bechtel workers repairing the facilities. Poor security has kept the company from rebuilding schools in some of Iraq's more hostile areas.

But the company also has drawn criticism for the quality of its repairs at some schools. Last month, a military civil affairs officer called Bechtel's work at 20 schools the Defense Department surveyed "horrible." According to Maj. Linda Scharf, a review of the schools found debris left in playgrounds, sloppy paint jobs and broken toilets. Some Iraqi school officials also have complained that the quality of Bechtel's work is poor.

Addressing the complaints, Ragan said, "Only two percent of the Bechtel program schools have required additional work. Inspections are being performed or have been scheduled and appropriate repairs are being made at these schools."

Two other engineering firms have teamed with Bechtel-Parsons Corp. of Pasadena, Calif., and Horne Engineering Services of Fairfax, Va. Parsons is working in Iraq for the U.S. Army Corps of Engineers to destroy recovered Iraqi ammunition, such as mines, mortars and missiles.

Bechtel said in a statement that the contract award came after a nearly three-month competitive process in which AID officials examined offers from multiple bidders. The process for awarding Iraq rebuilding contracts has been criticized by some lawmakers and procurement experts as lacking transparency and full competition.

The other large U.S. contractor in Iraq, Halliburton, has suffered the most vocal criticism, primarily from Rep. Henry Waxman, D-Calif., and Sen. Joseph Lieberman, D-Conn., both of whom have questioned how Halliburton won its oil-services contract and whether the company has overcharged the government for its work.

On Tuesday, Halliburton confirmed that it had received a waiver on Dec. 19, 2003 from the U.S. Army Corps of Engineers that freed one of its subsidiaries from having to obtain "certified cost or pricing data" from a subcontractor for importing fuel into Iraq.

Halliburton's Kellogg Brown & Root unit, which had been running the fuel contract for the military, was charging prices well above what the military could obtain through its own fuel service agency. That outfit, the Defense Energy Support Center, will now take over the contract. But KBR said the fact that the Pentagon had given the company a waiver showed that the company had "delivered fuel to Iraq at the best value, the best price and the best terms and in ways completely consistent with government procurement policies."

Lieberman on Tuesday called the waiver "indefensible," adding that it had justified Halliburton's "oil importation overcharges."

Lieberman noted that Pentagon auditors found that Halliburton overcharged the government by $61 million, but the Army Corps still ruled weeks ago that the charges were reasonable despite the presence of any supporting cost and pricing data.

According to Lieberman, the Corp's actions "smack of a cover-up."

Carol Sanders, a spokeswoman for the Corps, said the agency had not determined whether the government received a fair price for fuel, and the waiver only exempted KBR from obtaining specific pricing information from its Kuwaiti subcontractors. "The waiver does not relieve KBR of their responsibility to charge the government fair and reasonable prices for fuel purchases," she said.

The Defense Department is currently reviewing the fuel contract to determine if the government did receive fair and reasonable prices, Sanders said.