In one of the strongest signals to date that post-war
rebuilding costs in Iraq are escalating, U.S. authorities in
Baghdad plan to spend an additional $350 million on construction
work led by engineering firm Bechtel Group Inc. The company is the
government's prime contractor for repairing bridges, hospitals,
schools, airports and the electrical grid, all of which were
damaged in the recent war.
Bechtel was awarded the contract in April through the Agency
for International Development. An AID spokeswoman said Thursday
that the contract ceiling itself wasn't being raised. Doing so
would require congressional authorization, she said.
Rather, the U.S. occupation chief in Baghdad, Ambassador Paul
Bremer, has chosen to allocate the $350 million from a $2.5
billion rebuilding fund Congress appropriated this year, she said.
The White House hasn't requested any major new funds for
rebuilding Iraq, but a number of reports in recent days have
suggested a large supplemental funding request to Congress is
imminent. The Wall Street Journal first reported news of
Bremer's decision Thursday.
The task of rebuilding Iraq's beleaguered infrastructure has
been held up by the lack of security in the country. More
coalition troops have been killed since President Bush officially
declared major combat over in May, and contractors have recently
been killed in fighting, as well. Contractors cannot work easily
or as quickly as they'd like in areas that are still plagued by
small arms battles and sabotage, Defense Department officials have
said.
Administration officials, including Bremer, have stressed that
other countries and foreign donors, as well as foreign
corporations, must be brought into the rebuilding effort. However,
the officials have maintained that the U.S. government should
continue to direct the project.
Non-U.S. groups have been slow to belly up to the table, leery
of America's dominant role and the danger in Iraq. At a
reconstruction financing conference held in Washington this week
by an international development firm, some executives from foreign
companies voiced frustration that they couldn't secure risk
insurance in their own countries so that they could take part in
the rebuilding as subcontractors to U.S. firms.
The U.S. Export-Import Bank is engaged in an “ongoing
conversation” with administration officials and the government's
contractors over a proposal to fund some near-term rebuilding
costs, said David Chavern, the bank's deputy general counsel. The
Ex-Im Bank, a federal agency, would recoup its loan through the
future Iraqi oil sales.
Chavern, however, gave no indication that the loan package was
forthcoming. Various experts and officials close to the
negotiations have estimated the loan could amount to at least $4
billion.
Meanwhile, there are more signs post-war costs are growing.
Kellogg, Brown & Root, a subsidiary of oil services firm
Halliburton, has billed the government for almost $1.2 billion for
providing troop and logistics support to the armed forces,
according to an Army spokeswoman. KBR provides the housing and
feeding of soldiers and also maintains their housing facilities.
Those services are provided under the Logistics and Civil
Augmentation Program (LOGCAP). The cost of the Iraq operation has
already topped Halliburton's other forays with U.S. armed forces
in Africa, Europe, Saudi Arabia, Kuwait and Afghanistan. Only its
work in the Balkans, in which it earned about $2.2 billion, has
cost more than Operation Iraqi Freedom.
KBR also is trying to revitalize Iraq's oil infrastructure
under a contract with the Army Corps of Engineers. To date, the
Corps has spent $705 million on that contract, a spokesman said.
KBR is compensated on a cost-plus basis, meaning the company is
reimbursed for expenses and is awarded an additional percentage
fee. The Corps spokesman said the contractor's fee could range
anywhere between 2 and 5 percent.
Some contracting experts, as well as congressional
investigators, have criticized cost-plus contracts for encouraging
companies to spend more than is necessary to complete their work.
The General Accounting Office reprimanded the Army and KBR for
allowing costs to balloon during the Balkans operation.
“The Army should have done more to control costs,”
investigators reported in
September 2000. GAO found “a widespread view . . . that
[military personnel] had little control over the contractor's
actions once it was authorized to perform tasks.”
Auditors found a number of instances where the Army let KBR
perform services that the Army didn't need, which helped increase
costs. Army officials “frequently have simply accepted the level
of services the contractor provided without questioning whether
they could be provided more efficiently or less frequently and at
lower cost,” the report said.
