Iraq: Bidding for Contract Unfairly Favors Halliburton, Rivals Say

Publisher Name: 
San Francisco Chronicle

As the bidding deadline looms on two big contracts to repair Iraqi oil
facilities, some competitors grumble privately that the process favors
Halliburton, the Texas oil firm formerly headed by Vice President Dick Cheney,
because the bidding specifications closely resemble what one of its divisions
is currently doing in Iraq.

Before the Iraq war, Halliburton's KBR division, formerly known as Kellogg,
Brown & Root, had been awarded a secret, no-bid contract worth up to $7
billion. But congressional pressure forced the Army Corps of Engineers to
rescind most of that award and reopen the work to competition.

Now, the Army Corps is soliciting bids on two contracts for that work. One
is to repair facilities in north and the other in southern Iraq. Each could be
worth up to $500 million over the next few years. Those bids are due Aug. 14,
and Army Corps officials have said they will make awards in October.

But disenchanted competitors -- who include some of the world's best-known
engineering firms (though not San Francisco's Bechtel Corp.) -- say the very
nature of the bidding process gives the inside track to Halliburton. That's
because its KBR division is already doing some oil repair work in Iraq under
an abridged version of the now-rescinded $7 billion secret contract.

One potential bidder, who attended a July 14 meeting in Dallas where Army
Corps officials answered questions about the contracts, explained the basic
complaint.

According to the source, who spoke on condition of anonymity, the two
contracts up for bid cannot specify precisely what work needs to be done
because the needs of the Iraqi oil industry have not yet been laid out.

Given this uncertainty about the scope and therefore, the cost of the work,
each bidder is being asked to lay out its track record in a dozen broad
categories. They include things from putting out oil well fires and assessing
damage to maintaining pipelines and refineries and helping the Iraqis export
their oil.

Prospective bidders are also being asked to show the Army Corps how they
would handle two scenarios: putting out oil well fires and doing damage
assessments on Iraqi facilities, according to the official bidding
specifications.

But the source complained that the firefighting part of the process had no
real bearing on the nature of the work, because burning wells are not a
problem. More importantly, the source said, damage assessment is exactly what
KBR is doing in Iraq right now.

"They have data and information the rest of us are not even capable of
gathering," the source said. "Without having been there to see the facilities
and know whether they have been bombed or looted, it's hard to put together a
cohesive plan that represents reality."

During last month's briefing in Dallas, contractors asked Army Corps
officials whether KBR, by virtue of being in Iraq and being already engaged in
related tasks, had a conflict of interest that should prevent it from bidding.

The government's reply, provided in a transcript of the session, said
officials had considered the issue but were not obliged to release their
decision.

"They don't transcribe the chuckles" that followed the exchange, the source
said.

More than 50 firms have expressed interest in the new contracts by
registering to review the plans posted by Army Corps officials. They include
some of the world's best-known oil and engineering firms, such as Halliburton
Energy Services and KBR of Texas, Fluor Corp. and Parsons Engineering of
Southern California, and URS Corp., the San Francisco firm partially owned by
Richard Blum, husband of Sen. Dianne Feinstein, D-Calif.

But San Francisco's Bechtel, which already has a multimillion-dollar
contract to reconstruct portions of Iraq's infrastructure, is apparently not
bidding for the Army Corps contract.

In an e-mail, Bechtel spokesman Howard Menaker said the Army Corps has
signaled its intent to accelerate the transfer of responsibility for oil
repairs to Iraq's oil ministry.

"Given this plan," Menaker wrote, "Bechtel has decided to focus our efforts
on future opportunities with the ministry."

Halliburton officials did not return calls.

E-mail Tom Abate at tabate@sfchronicle.com.

AMP Section Name:War & Disaster Profiteering