U.S. Shuts Out Local Companies From Contracts, Iraqis Say

by Peyman Pejman

U.S. officials and the contractors working for them favor 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.

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 organized 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 more."

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 announced."

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 empty-handed.

"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 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."