Bechtel Top Contender in Bidding Over Iraq

ELIZABETH BECKER and RICHARD A. OPPEL Jr. / NY Times 29mar03

WASHINGTON, March 28 — Bechtel has emerged as one of the top two contenders for the major contract to reconstruct Iraq, people involved in the bidding said.

Officials with the Agency for International Development said today that a final decision had been delayed until next week, because "outstanding issues are holding this up," a spokeswoman for the agency, Ellen Yount, said.

These people say the chief issue is whether the government will insure the winning company against claims for property damage, injuries or death while working in Iraq, a provision that could save the company millions of dollars.

If that request is granted, the approval would be another significant improvement in a contract that would give the company a toehold in one of the most lucrative building programs in decades, a task that will cost $25 billion to $100 billion.

The method of awarding the contracts has angered allies. Just American companies were asked to submit bids, a move that British officials have protested. They say the United States has cut out them out of the contracts even as their armed forces fight beside the Americans.

Charges of bias have plagued the administration since the competitors were announced. They were among the largest and best politically connected companies. There was disagreement about the identity of the second competitor. Halliburton, where Vice President Dick Cheney was chief executive from 1995 until mid-2000, is no longer in the running, a fact first reported today by Newsweek and acknowledged by an aid official. A spokeswoman said she could not say whether Halliburton removed itself or was uncompetitive.

Bechtel is regarded among the world's largest contractors, and former Secretary of State George P. Shultz is on its board. It was a company that raised the indemnification problem. Some people said that problem could be a deal breaker.

Given the scope of the project, experts said, the request is understandable but will require a White House decision.

John P. Janecek, former deputy general counsel of the Air Force, said that such indemnification clauses were unusual and that they were typically granted for contractors involved in obviously hazardous enterprises like satellite-launching rockets.

"A lot of companies provide the government weapons, supplies, services that don't get indemnification even in wartime," Mr. Janecek said.

The director of the aid agency, Andrew S. Natsios, said time constraints and the need to work with classified information forced the administration to restrict the candidates to American companies. Mr. Natsios has also said there was no possibility of influence peddling. His spokeswoman repeated today that the administration was following standard procedures in an emergency.

Experts questioned whether rules were being bent. They point out that the procurement agreement of the World Trade Organization requires all countries to have an open and transparent bidding process. Usually, United States government contracts are posted on a Web site and are open to all bidders, foreign or American.

As a result, among the top 50 companies that obtained federal contracts in the 2001 fiscal year were British Nuclear Fuels, No. 15; British Aerospace, No. 16; and Philipp Holzmann, the big German contractor, No. 34.

The government lets more than $200 billion a year in contracts.

Steven L. Schooner, co-director of the government procurement law program at George Washington University, said he was not convinced by the argument that companies needed to be cleared to handle classified material to build bridges or lay new roads.

"That defense of a need for speed and security clearances will be a classic loser" at the World Trade Organization, Mr. Schooner said. "We are sending the message that we are insular, we are closed."

Mr. Natsios has said, on the contrary, that he won a waiver in January to let all companies, foreign and domestic, to bid for subcontracts that could amount to half the reconstruction money.

Britain and other European nations remain unhappy with the arrangements. When the Agency for International Development announced this week that Stevedoring Services of America, headquartered in Seattle, had the $4.8 million contract to run the port of Umm Qasr in Iraq, British officials and labor leaders complained. The company, they said, has an antiunion history.