U.S. Rejects Criticism on Awarding of Iraq Contracts

March 27, 2003

International Herald Tribune

WASHINGTON, March 27 - An American official has strongly rejected European complaints that the United States was unfairly awarding contracts for the reconstruction of Iraq to American companies. The overriding United States objective, he said today, was to provide the quickest possible relief to the Iraqi people.

The official, Alan Larson, an under secretary of state, said he was "surprised" by suggestions from European companies and officials that the United States was unfairly guarding the spoils of a highly controversial war by awarding the first big reconstruction contracts to American companies.

But with estimates that reconstruction costs could eventually total tens of billions of dollars, the debate, featuring angry European suggestions of United States arrogance and cronyism, is hardly academic.

American policy in awarding contracts, Mr. Larson said after a meeting in Brussels with European Union officials, "was about getting aid quickly and not about who will gain in reconstruction," Reuters reported.

Mr. Larson said that giving American companies first-line responsibilities was simply a matter of efficiency - "the responsible thing to do," he said. Electricity supplies had to be restored, ports opened, and safe water provided as quickly as possible.

But European critics complain that the United States is favoring politically well-connected American companies, and looking to Iraq, in the word of one European government spokesman, as a "protectorate."

The Army Corps of Engineers announced Tuesday that it had granted the primary contract for extinguishing oil-well fires in southern Iraq to a subsidiary of Halliburton, the Houston-based company where Vice President Dick Cheney was once the chief executive. (The value of the contract is tied to how many fires have to be put out.)

Two other contracts, worth a total of nearly $12 million, also went to United States companies. And other contracts, worth several hundred million dollars, are soon to be announced. They cover reconstruction or repairs to five airports, railroads, schools, hospitals, irrigation systems and other facilities.

Some of the companies best-placed to win contracts are, in fact, among the politically best-connected in Washington: the Fluor Corporation, which has ties to former Pentagon procurement officials; the Bechtel Group, whose officials include former Secretary of State George P. Shultz and other former Republican cabinet members; and Halliburton, where Mr. Cheney was chief executive from 1995 to 2000.

Company officials point out, however, that they are among the few with extensive experience in the sort of difficult and specialized work they seek.

Many in Europe found a comment Wednesday by Secretary of State Colin L. Powell particularly rankling. He told Congress, "We didn't take on this huge burden with our coalition partners not to be able to have a significant dominating control over how it unfolds."

Christos Protopapas, a Greek government spokesman, responded tartly: "Iraq is not the protectorate of anyone else. It does not belong to some who think they can manage it as they like."

Britain, the second-largest contributor of forces to the United States-led coalition, also wants better treatment for its companies in the bidding process.

British officials have lobbied the United States Agency for International Development on behalf of the approximately 100 British companies that have registered an interest in working in Iraq with a government trade-promoting agency, Trade Partners U.K., Bloomberg News reported.

The American aid agency has said that "non-American firms are not `excluded' from the U.S. government's procurement process," but that for some early projects "we had a sufficient number of American firms to compete." Bid winners can select subcontractors from any country not on the United States list of countries with terrorist links.

The aid agency has awarded a $7.1 million contract to the Washington-based International Resources Group to provide technical expertise, and a $4.8 million contract to Seattle-based Stevedoring Services of America to manage Umm Qasr, the Iraqi seaport, through which the bulk of humanitarian aid is expected to flow.

Peninsular and Oriental Steam Navigation, the largest British sea-freight company, had vied unsuccessfully for the latter contract.

As part of a nearly $75 billion emergency funding request for the war and its aftermath, President Bush has asked Congress for $8 billion to rebuild Iraq and help neighboring countries.

Mr. Larson, who was in Brussels for regular European Union-United States contacts, emphasized that the sides had agreed on the need to fund humanitarian aid for Iraq.

He said that he hoped the United States and the European Union would come together in rebuilding Iraq, following the "pattern of cooperation" in postwar Afghanistan.

Asked about another hotly debated issue - who will manage the enormous Iraqi oil reserves after the war - Mr. Larson said that "it will be up to the new Iraqi government to decide how to exploit this great resource."