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USA: Bechtel to Rebuild Iraq

Politically Connected Firm Wins $680 Million Bid

by David R. BakerSan Francisco Chronicle
April 18th, 2003

Bechtel Corp., the San Francisco construction giant known for its global reach and high-powered political connections, won a contract Thursday worth up to $680 million to rebuild Iraqi roads, schools, sewers and hospitals damaged in the war.

The contract, sought by the nation's largest construction firms, places Bechtel squarely in the middle of U.S. efforts to reshape Iraq.

The company will repair Iraq's waterworks, its electrical grid and its sewage systems. Bechtel also may dredge the seaport of Umm Qasr -- gateway for food and medical supplies flowing into the country -- as well as repair Iraq's airports.

The U.S. Agency for International Development, in charge of picking companies for Iraq's reconstruction, offered few details Thursday of why it chose Bechtel. The selection process, which was cloaked in secrecy because of national security concerns and which was open only to U.S. companies that were invited to bid by the government, angered critics in Congress and abroad.

Bechtel, however, pointed to its 60-year history building pipelines, airports and oil sites in the Middle East as credentials for the job. The company has roughly 1,000 people stationed in the region.

"Bechtel is honored to have been asked by USAID to help bring humanitarian assistance, economic recovery and infrastructure reconstruction to the Iraqi people," Tom Hash, president of Bechtel National, said in a prepared statement Thursday. "We will now begin meeting with USAID to start detailed planning on this important effort."

Iraqis May be Involved

Although the company offered few details of its plans, spokesman Michael Kidder said Bechtel was meeting with USAID to prioritize the work, determining which of the many tasks had to be handled first. The firm then will seek subcontractors to help, a process Kidder said would be open to companies from other nations.

American taxpayers will pay for the initial costs of the contract, but Iraqi oil revenue may eventually pay for much of the reconstruction.

USAID raised the possibility that some of the work would go to Iraqis, saying in a press release that Bechtel would "engage the Iraqi population and work to build local capacity." An agency spokeswoman, however, said USAID had no authority to require that Bechtel hire subcontractors from any specific country.

The contract is the largest for Iraq's reconstruction so far awarded by USAID, which has also hired companies to piece back together the country's education system and run the Umm Qasr seaport. Although the government may spend $680 million on the contract during the next 18 months, the initial award to Bechtel Thursday was far smaller, totaling $34.6 million.

Many predict, however, that the reconstruction job could lead to other lucrative work in Iraq, as the country rebuilds after decades of international sanctions and war.

"Presumably, if you are the first one in to do the initial work, the easiest thing to do is to say, 'OK, you get the next contract,' " said Michael Tierney, visiting assistant professor of government at the College of William and Mary in Virginia, before Thursday's announcement. "Whoever it is will presumably have the inside track."

Bechtel's decision to bid for the contract turned the company's Beale Street headquarters into a flash point for protests in recent weeks. Demonstrators repeatedly tried to block the building's entrance, saying Bechtel wanted to make money from war.

"They use the word reconstruction," said Patrick Reinsborough, an organizer with Direct Action to Stop the War. "To us, this appears much more a second invasion of Iraq, a carving up of the country by U.S. corporations."

The government's process of picking companies to rebuild Iraq drew its own protests.

Foreign firms resented being shut out. Government watchdogs noted that all six of the companies bidding on the contract Bechtel won Thursday donated heavily to American politicians -- $3.6 million between 1999 and 2002, according to the Center for Responsive Politics. Most of the money went to Republicans. Bechtel and its employees contributed $1.3 million to federal campaigns and candidates over the past three years, with 59 percent going to Republicans and the rest to Democrats.

Friends in High Places

The reconstruction contract bidders had powerful friends.

Bechtel's corporate board includes George Shultz, secretary of state during the Reagan administration. Riley Bechtel, the firm's chairman and chief executive, was recently appointed to President Bush's export council. Caspar Weinberger was a Bechtel director, vice president and general counsel before becoming Reagan's secretary of defense in 1980.

Fluor Corp., one of Bechtel's top competitors for the job, boasts as a board member retired Adm. Bobby Inman, former head of the National Security Agency and deputy director of the Central Intelligence Agency. Last year, Fluor also hired a former Army official who oversaw the Pentagon's procurement program.

"It raises the possibility that the companies specially invited to bid on this huge government contract were those with deep pockets and strong connections," said Steven Weiss, spokesman for the Center for Responsive Politics. "And companies that may have been just as qualified but didn't have as much money or didn't have the connections weren't invited."

Bidders bristled at the charges of cronyism.

"For over 100 years, we've been known as builders, and we're known as the best," Bechtel's Kidder said. "If you look at our record, it's our performance that's the bedrock of our success."

In addition to Bechtel and Fluor, the government reportedly also invited Louis Berger Group Inc., Parsons Corp., Washington Group International Inc. and a subsidiary of Halliburton Co. to bid on the reconstruction work.

Bechtel's connections run to the top of USAID. The agency's director, Andrew Natsios, briefly ran Boston's Big Dig, a mammoth project in which Bechtel and another construction firm are burying miles of freeway beneath the city's downtown. Massachusetts politicians have blamed Bechtel and its partner for allowing costs to balloon on the $14.6 billion effort.

Natsios' experience with Bechtel, however, probably would not have made a difference in the company's bid for Iraq reconstruction work. Although he heads the agency, he does not pick the companies that receive reconstruction contracts, instead leaving that job to a procurement specialist and two independent panels.

Bechtel's Work Dates to WWII

Iraq won't be the first Middle Eastern country reshaped by Bechtel.

The company first started working in the Persian Gulf during World War II and never left. Bechtel built or expanded early refineries in Bahrain and Saudi Arabia to feed the allies' need for fuel.

After the war, Bechtel stretched a pipeline 850 miles across the desolate Saudi desert to Jordan. The company built an electrical plant to light the Saudi capital of Riyadh, linked the city to the Persian Gulf with a new railroad and later added an airport. Muslim pilgrims from Jidda travel to the holy city of Mecca on a Bechtel-built highway.

When coalition forces drove Iraq's army from Kuwait in 1991, much of the cleanup work fell to Bechtel.

The company was one of several that extinguished oil wells set ablaze by the Iraqis and mopped up lakes of crude spilled into the desert. When the fires were out, Bechtel took the lead in repairing the damaged pipelines, production sites and shipping terminals trashed by retreating soldiers.

Mary Ann Tetreault, a professor of international affairs at Trinity University in Texas, visited Kuwait before and after Iraq's invasion. Many Kuwaitis, she said, were convinced Bechtel had paid off the royal family to win the contract, a perception Bechtel denies. Although Bechtel won't say how much it received, most estimates put the contract's worth at roughly $2 billion.

And yet, Tetreault praised Bechtel's handling of the job itself.

"It was extremely smooth, very professional, very fast," she said. "And other than the political wrangles over who got paid off by whom for what, there were no complaints about the quality of the work."

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Bechtel at a glance

-- Employees: 47,000

-- Current projects: 900

-- Countries: 60

-- Ownership: Bechtel family

-- Founded: 1898

-- Major projects: BART, Boston's Big Dig, Hoover Dam and the Channel Tunnel rail link between Britain and France.

-- Revenues: $13.4 billion (2001)

Source: Bechtel





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