Iraq: Contracts Leave Local Business Out

Publisher Name: 
Inter Press Service

BAGHDAD - U.S. officials have shut Iraqis out of the business of
reconstruction contracts, many local businessmen say.

U.S. officials and the contractors working for them favour a few high-profile Iraqi
companies they trust, and set excessively high contract standards that most Iraqi
companies cannot meet, they say.

U.S. officials have reportedly allowed some companies closely associated with the
former regime to win lucrative contracts.

U.S. officials deny most of the charges. They say some of the frustration comes
because Iraqis do not understand legal obligations.

Reconstruction contracts in Iraq are awarded through three sources: the U.S. Army,
U.S. Agency for International Development (USAID) and the Coalition Provisional
Authority (CPA) headed by Paul Bremer.

USAID contracts are awarded through the Bechtel Corporation. Army contracts are
awarded primarily through the Halliburton Corporation which Vice President Richard
Cheney headed until he moved to the White House. Some CPA contracts are awarded
through Halliburton, but it has also signed some of its own agreements.

The total value of the contracts awarded has not been made public, but sources in
Baghdad put the figure above 10 billion dollars.

For most Iraqis the two primary ways of learning about new reconstruction contracts
are through a website set up by the CPA, and by attending a weekly meeting at the
Convention Centre in Baghdad.

The weekly meetings are organised by Kellog, Brown & Root, engaged by Halliburton to
find subcontractors for its work.

Several Iraqis say they are frustrated by the process.

"We look at the website, it has some good information about each contract, but not
enough," Hend Adnan from an Iraqi engineering company told IPS. "They don't give
information over the phone, so you have to come and attend these meetings to know

But coming to the meetings does nothing to end the Iraqis' suspicion of the process.

"In colloquial Arabic we say things are done behind doors," says contractor Haidar
Abdel Kazem. "You don't 'feel' the contracts, you feel it is decided before they are

Iraqis are often given less than a week to respond to bids, and asked to present
lengthy documents.

"They give four, five days," says Abdel Kazem. "How are you going to prepare for it,
how are you going to answer it, how are you going to get the answer to them? The
period is unreasonable."

And when they do respond properly to the contracts, many say they go home

"I am not happy with their system," says Adnan. "My company has been coming here for
four months and has responded to at least 10 bids but has not won anything. You look
at the list of the companies that win and see there are a few companies that are
always on top of the list."

Other Iraqis complain that U.S. officials have let firms associated with the former
regime enrich themselves once more.

Two such companies are Boniye & Sons and Mediterranean Global Holdings. The first
belongs to an old Iraqi family which had diverse business interests during Saddam's
time. The family is widely reputed to have been close to Saddam and his son Uday.

The second is a London-based company headed by Nadhmi Auchi, an Iraqi- British
businessman who left Iraq in the early 1980s and has since accumulated a fortune
estimated at more than a billion dollars.

The CPA awarded Boniye "a couple of fairly large" construction contracts, says a
senior U.S. official.

Auchi is said to have secured a multi-million dollar contract through associates in
Baghdad to establish a mobile telephone network for central Iraq, including Baghdad.

Boniye managers could not be reached for comment. They were in Saudi Arabia for the
annual Muslim pilgrimage, company officials said.

Officials at Auchi's London headquarters did not respond to emailed questions and
numerous phone calls.

The question of fairness in contracting procedures has become a touchy point in
Baghdad. It is likely to gain more attention as the United States plans to award
about 25 billion dollars in reconstruction contracts next year, CPA officials say.

Asked for an official comment, a U.S. spokeswoman said her colleagues in Iraq "have
answered questions till they have become blue in the face. You want to trash them
too, go ahead."

She said Bechtel, KBR and Halliburton now refer all questions on contracting to
their headquarters in the United States.

But the officials are more accommodating off the record.

They say a part of the dissatisfaction and frustration Iraqis feel is due to
misplaced expectations. All three sources of awarding reconstruction contracts
receive funds from the U.S. Congress, and they are legally obliged to give
preference to U.S. companies, they say.

But U.S. companies are encouraged, though not obliged, to hire as many Iraqi
subcontractors as possible, the officials say.

In USAID contracts, Bechtel and KBR have dished out half their contracts to Iraqis,
and plan to increase the figure to 70 percent "soon", a U.S. official familiar with
USAID contracts said.

U.S. officials concede that some contracts may have been awarded to companies
associated with the previous regime. But they say a company is not tied to the
previous regime just because some Iraqis say so.

About the short response period to the contracts, U.S. officials say this is in the
nature of the fast turnaround work in Iraq. They say if Iraqis get short notice to
respond to bids, U.S. contractors get just that much notice from their bosses.

U.S. officials concede that setting high standards for winning contracts is true for
"sophisticated" engineering and construction contracts.

"We are here trying to do a good job and build things that will still be standing
50, 100 years from now," says a U.S. official. "Sorry if we are trying to do too
good a job for people who have been deprived of it for so many years."

AMP Section Name:War & Disaster Profiteering