Bechtel Wins Iraq Contract For $1.8 Billion
Pentagon Plans to Spend More As Transfer of Power Nears
By Mary Pat Flaherty
Washington Post Staff Writer
Wednesday, January 7, 2004; Page E01
Bechtel National Inc. yesterday was awarded a $1.8 billion contract for more reconstruction work in Iraq, while the Defense Department announced plans for seeking $5 billion more in rebuilding contracts.
The flurry of activity comes as agencies leading the rebuilding effort continue to adjust to shifting political and security conditions in Iraq, which already have caused a month-long delay in seeking proposals from contractors.
The White House decision to transfer sovereignty to Iraq by June 30 prompted adjustments in spending plans, Pentagon and State Department officials said. Contracts worth $4.6 billion for reconstruction will be deferred until after the transfer of power to give the Bush administration more " flexibility" in its responses to needs that Iraqi officials identify, said Larry DiRita, chief Pentagon spokesman.
A report the Bush administration sent to Congress on Monday detailed how officials have recast reconstruction priorities and shifted money to emphasize security issues. For example, the report said the administration proposes shifting $14 million from the new Iraqi army account to increase, to $81 million, funding for a 50,000-member force to protect government buildings and embassies throughout Iraq.
San Francisco-based Bechtel, which already had a $1 billion contract from the U.S. Agency for International Development, will work with Parsons Corp. of Pasadena, Calif., on the new deal. Bechtel was chosen over two competitors in open bidding and presented the lowest price and highest technical scores, according to USAID reviewers.
Timothy T. Beans, the agency`s procurement director, said the company`s presence in Iraq did not make it the presumed favorite for the new contract. " Bechtel had just as much chance to mess up as to do well," Beans said.
The USAID and upcoming Pentagon awards involve broad plans for the work to be done in rebuilding or rehabilitating major systems in Iraq, including the electrical grid, water and sewage systems, and airports. The final decisions on the projects and sites that will get priority will come through L. Paul Bremer, the civilian administrator for the U.S.-led Coalition Provisional Authority, officials said.
The Pentagon contracts could be awarded by March 1, said David J. Nash, who heads the Pentagon office managing contracts for Bremer. Nash previously estimated that the requests for bids would go out last month, but they were delayed by continuing security problems and the decision to transfer power sooner than originally thought. " We want to make sure it`s correct before we go forward," Nash said. " This is a lot of money."
Much of the Bechtel work and upcoming Pentagon work would continue after the government transition in Iraq. USAID Administrator Andrew S. Natsios said, " I can`t imagine all of this money would be spent by June."
The United States plans to spend about $12.6 billion this year on Iraqi reconstruction and $5.8 billion next year, according to the report to Congress. Congress approved $18.6 billion for reconstruction in a supplemental budget bill in November.
Both the process for disbursing the reconstruction funds and the procedures used under some emergency contracts awarded shortly after the U.S. invasion have been controversial.
In early December, Deputy Defense Secretary Paul D. Wolfowitz said countries that opposed the war with Iraq would be barred from competing for prime reconstruction contracts, effectively excluding companies from France, Germany, Russia and Canada.
Since then, France, Germany and Russia agreed to administration requests to grant some debt relief to Iraq. DiRita said yesterday that there has been no change in the policy regarding countries allowed to bid on the main contracts, though many contracting decisions remain under review. Asked if the offer to forgive Iraqi debt positions countries for a chance to bid on prime contracts, DiRita said there is no such " linkage."
Meanwhile, in Baghdad yesterday, the U.S. Army Corps of Engineers confirmed a Wall Street Journal report that it determined that a Halliburton Co. subsidiary that has been importing oil into Iraq from a Kuwaiti company received a " fair and reasonable" price. A preliminary Defense Department audit found that the subsidiary, KBR Inc., may have overcharged the U.S. government by $61 million.
Richard Dowling, Corps of Engineers spokesman, said a waiver signed by the corps commander, Lt. Gen. Robert B. Flowers, exempts the firm from providing " certified" price and cost information, which the Kuwaiti supplier does not give out. " The waiver recognizes that things are different here," Dowling said. " The prices are reasonable. KBR clearly has made the case that they sought the best prices they could get."
Flowers said in an interview in Kuwait on Sunday that KBR " got the best price." He said that even if the company paid a premium for the fuel, " we can`t afford to have the Iraqis rioting in the streets over a lack of fuel."
Staff writer Jackie Spinner in Baghdad contributed to this report.
© 2004 The Washington Post Company
