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--- Begin Message --- -Caveat Lector------Original Message-----
From: R. J. Tavel, J.D. [mailto:[EMAIL PROTECTED]
Sent: Sunday, March 23, 2003 12:30 AM
To: Learning Electronically About Freedom mailing service
Subject: [Lis-LEAF] ONE, TWO, THREE, WHAT ARE WE FIGHTIN' FOR ...
Which Companies Will Put Iraq Back Together?
By DIANA B. HENRIQUES
http://www.nytimes.com/2003/03/23/business/23REBU.html
This article was reported by Richard A. Oppel Jr., Diana B. Henriques and
Elizabeth Becker, and was written by Ms. Henriques.
WAR began last week. Reconstruction starts this week.
That, at least, is how it looks to government contract officers, who in the
coming days plan to give American companies the first contracts to rebuild
Iraq, a task that experts say could eventually cost $25 billion to $100
billion. It would be the largest postwar rebuilding since the Marshall Plan
in Europe after World War II.
That comparison is being made at every opportunity by Bush administration
officials, who emphasize American generosity and farsightedness. But the
government's decision to invite only American corporations to bid on these
contracts has added to the profound international divisions that already
surround the war.
The United States plans to retain control over the occupation and
reconstruction of Iraq, allowing the administration to decide how it will
spend the money needed to repair the country. These contracts will be
financed by the taxpayer, although senior administration officials have
hinted broadly that Iraqi oil revenue will also be used to rebuild the country.
"We're going to use the assets of the people of Iraq, especially their oil
assets, to benefit their people," said Secretary of State Colin L. Powell
on Friday.
At the top of the to-do list, according to confidential bidding documents,
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. Dredging work is expected to begin immediately after the
port, which was seized by a British-led invasion force on Friday, is secure
enough. The bid terms give contractors no more than eight weeks to prepare
the port to handle the unloading of pallets and containers from large ships.
A separate bidding process is being conducted by the Defense Threat
Reduction Agency, a unit of the Defense Department. That agency is seeking
bids and r�sum�s from companies that are skilled in dismantling and
neutralizing chemical and nuclear weapons.
Other immediate priorities will be overseen by the United States Agency for
International Development. These include rebuilding two international and
three domestic airports, ensuring that potable water is available and
reconstructing electric power plants, roads, railroads, schools, hospitals
and irrigation systems.
Bids sought by the Army Corps of Engineers call for more "expedient"
repairs throughout the region that would be controlled by the United States
Central Command. These repairs include installing temporary doors, using
plywood to cover broken windows and covering damaged roof areas with
plastic sheeting.
For now, the Bush administration is seeking money under a supplemental
appropriation expected to be submitted to Congress shortly, according to
administration officials.
BUT it may face some heat from lawmakers upset that the administration is
moving so swiftly to sign deals with private companies without consulting
Congress first.
The companies that have been invited to bid on the work include some of the
nation's largest and most politically connected construction businesses.
Among them are Halliburton, where Vice President Dick Cheney served as
chief executive from 1995 until mid-2000; the Bechtel Group, whose ranks
have included several Republican cabinet alumni; and Fluor, which has ties
to several former top government intelligence and Pentagon procurement
officials.
Others bidding on reconstruction business are the Parsons Corporation, the
Louis Berger Group and the Washington Group International, which absorbed
Morrison-Knudsen in 1996.
Two other companies have submitted bids in the current round of contract
awards, but contract officials declined to identify them. The final roster
of seven bidders has already been narrowed to two or three, and contracts
are expected to be awarded this week, according to administration officials.
While those contracts are sizable - potentially worth more than $1 billion
- they are a pittance compared with the deals to follow, according to
Andrew S. Natsios, the director of United States Agency for International
Development, which is overseeing the largest contract put out for bids so far.
But Mr. Natsios disputed some of the outside estimates about the
reconstruction costs. For example, a report jointly sponsored by the
Council on Foreign Relations predicts that it could take $25 billion simply
to repair oil export installations and restore the Iraqi electric power
system to its status before the first Persian Gulf war in 1991.
"The private contracting companies, all the consulting firms are going to
tell us it's going to take $50 trillion to rebuild Iraq," Mr. Natsios said.
"We'll make Iraq look like Park Avenue based on this amount of money. These
are absurd estimates."
THE administration, clearly wary of a long occupation, says it hopes that a
new Iraqi interim authority can be in place within a month of victory and
that the authority's officials can make some decisions about the pace and
financing of reconstruction.
But the administration is already poised to decide which companies will
initially oversee and carry out the work. They have extensive experience -
and some also have awkward political and financial baggage.
No company has firmer political connections than Kellogg Brown & Root, the
engineering and construction arm of Halliburton. Besides its links to Mr.
Cheney, the company has been a major military contractor since World War
II. Most recently, it handled the high-speed construction of the Guant�namo
prison compound for terror suspects .
But since last May, the company has also come under scrutiny by the
Securities and Exchange Commission, which is investigating how the company
has accounted for cost overruns on its construction and engineering work
since 1998. And this spring, its shareholders will vote on a proposal,
sponsored by two giant New York City pension funds, calling for a review of
Halliburton's previous business ties to Iran.
Louis Berger, based in East Orange, N.J., could be a dark-horse contender
in the Iraq reconstruction sweepstakes. Besides its work on an ambitious
pipeline to carry oil from Tengiz, Kazakhstan, to a deep-water port on the
Black Sea in Russia, the privately held firm has been an important
government contractor in the Balkans for years. More recently, it won a
contract to oversee extensive infrastructure development in postwar
Afghanistan. The centerpiece of the $300 million contract was the
rebuilding of a shattered 600-mile highway from Kabul to Herat.
Derish Wolff, the president and chief executive, declined to comment on the
current reconstruction bidding process. But he noted that the company had
been doing extensive "nation building" work in the Balkans.
"There is a difference between reconstruction and nation building, where
you build institutions, and not just infrastructure," Mr. Wolff said. "You
have to build, and you have to teach them to build."
BECHTEL is considered the largest contractor in the country, and one of the
largest in the world. Its board includes a former secretary of state,
George P. Shultz, and its ranks once included a former defense secretary,
Caspar W. Weinberger.
Bechtel, privately held and based in San Francisco, helped build the Hoover
Dam, oversaw work on the tunnel under the English Channel and worked on the
cleanup of Chernobyl. But it is facing a political meltdown of its own in
Massachusetts, where it is under severe criticism by the state's inspector
general for more than $1 billion in cost overruns on the tunnel and highway
construction project in Boston, the so-called big dig.
Governor Mitt Romney of Massachusetts has ordered an independent review of
the project, which was managed for the Massachusetts Turnpike Authority by
Bechtel and its joint venture partner, Parsons Brinckerhoff - which is not
related to the Parsons Corporation that is bidding on the Iraqi work.
Jonathan Marshall, a spokesman for Bechtel, said the inspector general's
recent report on the project "misrepresents the facts" and predicted that
the company would be vindicated by the independent review.
The joint venture "has saved taxpayers more than $1 billion and cut years
off the completion time," Mr. Marshall said. "We continue to stand by our
record." Mr. Marshall would not comment on the recent bidding for Iraq
reconstruction work.
Fluor, based in Aliso Viejo, Calif., is not currently working on any Agency
for International Development projects, but it has extensive experience
building petroleum facilities in difficult places. It is building an
enormous plant on Sakhalin Island, off Russia's Pacific coast, for an
international consortium that includes Exxon Mobil, and is developing oil
and gas fields in Kazakhstan for a consortium whose largest member is
ChevronTexaco.
Last April, Fluor hired Kenneth J. Oscar, who as acting assistant secretary
of the Army oversaw the Pentagon's $35 billion-a-year procurement budget.
Its board includes Bobby R. Inman, a retired admiral who was also former
director of the National Security Agency and deputy director of the Central
Intelligence Agency.
Fluor is currently in arbitration to untangle a dispute with Anaconda
Nickel in Australia over Fluor's work on a $615 million nickel-cobalt
processing plant in western Australia. Fluor has disputed the accusations
of poor workmanship, but Anaconda has collected millions of dollars in
compensation in the first phase of the arbitration.
A spokesman for Fluor, Jerry Holloway, confirmed that it had been invited
to bid on the work in Iraq but said he could not comment on the scale or
scope of the contracts.
PARSONS, an employee-owned company based in Pasadena, Calif., is one of
Bechel's most formidable rivals in the construction market.
Parsons, too, would not comment on the current procurement process. But it
has done extensive postwar reconstruction work in Bosnia and Kosovo and
built the Saudi military city of Yanbu. It also helped build the subway
system in metropolitan Washington. It does not have the prominent political
connections that Bechtel and Fluor have, though the labor secretary ,
Elaine Chao, served on its board for about a year before joining the
cabinet in January 2001.
In 1998, Parsons won a contract to take over the vehicle inspection program
in New Jersey, a deal that has mired the company in a long dispute over
delays and malfunctions. But last year, the state renewed the company's
contract for another two years, though it cut the company's pay rate and
established penalties for poor service.
After the Washington Group International, based in Bosie, Idaho, took over
the ailing but venerable Morrison-Knudsen, it continued to acquire
engineering operations from Westinghouse and Raytheon. The Raytheon
purchases became a financial quagmire, and Washington filed for Chapter 11
bankruptcy protection in 2001. Last year, it emerged after an extensive
restructuring.
It remains a major military contractor, however, and has done extensive
work in the department's so-called demilitarization work, which involves
the dismantling and safe disposal of old weapons. It dominates the business
of neutralizing and disposing of chemical weapons within the United States,
according to Jack Herrmann, a spokesman.
CONFIDENTIAL contract documents indicate that companies will be paid under
an arrangement known as "cost plus fixed fee." Once the cost of a project
is established, the contractor is entitled to recover those costs plus a
fee that is a fixed percentage of those costs. That percentage is generally
8 to 10 percent, although the security precautions required under the Iraq
contracts might justify a higher fee in some cases, construction industry
analysts said.
The fast-track reconstruction bidding is already drawing fire in Congress.
"We can't tell the taxpayers in this country, who are going to be asked to
foot the bill for all of this, what the charge is going to be in the
aftermath," Senator Christopher Dodd, a Connecticut Democrat who is on the
Foreign Relations Committee, complained recently. "Apparently, I think the
administration believes that they can get away with it, that the Congress
will not do anything about it."
Administration officials said they moved swiftly because they needed to
line up contractors with proven track records and high-level security
clearances.
"The prime contractors are American, and there's a reason for that: In
order to work in Iraq you have to have a security clearance, and the only
companies that have security clearances are a certain number of American
companies that have done this work before in war settings," Mr. Natsios said.
More than 50 percent of the money will actually be spent by subcontractors.
Companies in any country, save those on the administration's terror list,
can apply to be subcontractors, he added.
He also dismissed the lawmakers' criticism as uninformed. "I think some
senators and congressmen, because they're under severe stress, have not
maybe gone into the details of this, but their staffs have been briefed,"
Mr. Natsios said.
But those arrangements do not satisfy construction industry experts, who
say that the administration is asking for trouble by not setting up an
independent monitoring process from the beginning.
Thomas D. Thacher II runs a consulting firm that monitored the integrity of
the cleanup process at ground zero in Manhattan for the Federal Emergency
Management Agency and New York City. He questioned the wisdom of demanding
such speed without also establishing ways to monitor the integrity of the
rebuilding process.
"Anytime you have an emergency response driven by time, the opportunity for
fraud, waste and abuse is huge," Mr. Thacher said. "And when the
opportunity is that great, it will occur."
[Non-text portions of this message have been removed]
"We are fast approaching the stage of the ultimate inversion: the stage where the government is free to do anything it pleases, while the citizens may act only by permission; which is the stage of the darkest periods of human history, the stage of rule by brute force." [Ayn Rand, The Nature of Government]
For Liberty in Our Lifetime,
R.J. Tavel, J.D., Founder
Liberty's Educational Advocacy Forum
http://freedomlaw.com
promotes "action that raises the cost of State violence for its perpetrators ... lay(ing) the basis for institutional change." [Noam Chomsky]
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