Bechtel, the US construction company, was awarded a contract valued at up to $1.8bn on Tuesday to repair Iraq's electricity grids, roads, ports and other infrastructure damaged by the coalition invasion and years of neglect.
The award was announced as the US administration revealed its plans to spend about $12.7bn this fiscal year and $5.8bn next on reconstruction projects in Iraq.
The contract is Bechtel's second big assignment in postwar Iraq. The US Agency for International Development (USAID), the State Department arm overseeing the contract, said Bechtel and its partner, Parsons Corp, beat two other entrants on cost and technical expertise. USAID last year gave Bechtel an emergency $680m reconstruction contract that has since grown to more than $1bn.
In a report sent to Congress, the administration said it would quadruple budgets to $400m for "democracy-building activi ties" - such as developing political parties - in preparation for selection of a new sovereign Iraqi government by June 30. The largest sum - $5.5bn - will be devoted to Iraq's electricity sector, while $3.2bn will be dedicated to security and law enforcement.
The report, submitted to Congress by the White House Office of Management and Budget (OMB), predicted that Iraqi oil revenues would jump sharply this year to about $13bn from $3.9bn in 2003.
Following the Bechtel announcement the Coalition Provisional Authority was expected to release details on 17 new Iraq contracts worth an estimated $5bn that could be awarded by early March.
Andrew Natsios, USAID's director, sought to quash the controversy over the first batch of Iraq contracts after they were granted to well-connected companies such as Bechtel and Halliburton, with little competition.
"The notion that any of us are going to go in and manipulate the process is absurd," Mr Natsios said.