Billions Up for Grabs In Postwar Contracts

NEW YORK -- War began last week. Reconstruction starts this week.

That, at least, is how it looks to government contract officers, who in the coming days plan to give U.S. companies the first contracts to rebuild Iraq, a task that experts say could eventually cost $25 billion to $100 billion. It would be the largest postwar rebuilding since the Marshall Plan in Europe after World War II.

That comparison is being made at every opportunity by Bush administration officials, who emphasize U.S. generosity and farsightedness. But the government's decision to invite only U.S. corporations to bid on these contracts has added to the profound international divisions that already surround the war.

The United States plans to retain control over the occupation and reconstruction of Iraq, allowing the administration to decide how it will spend the money needed to repair the country. These contracts will be financed by the taxpayer, although senior administration officials have hinted broadly that Iraqi oil revenue will also be used to rebuild the country.

"We're going to use the assets of the people of Iraq, especially their oil assets, to benefit their people," U.S. Secretary of State Colin Powell said Friday.

At the top of the to-do list, according to confidential bidding documents, is rebuilding Iraq's only deep-water port, the harbor at Umm Qasr, where cargo is loaded on ships that travel down a waterway in southern Iraq to the Persian Gulf. Dredging work is expected to begin immediately after the port, which was seized by a British-led invasion force Friday, is secure enough. The bid terms give contractors no more than eight weeks to prepare the port to handle the unloading of pallets and containers from large ships.

A separate bidding process is being conducted by the Defense Threat Reduction Agency, a unit of the Defense Department. That agency is seeking bids and resumes from companies that are skilled in dismantling and neutralizing chemical and nuclear weapons.

Other immediate priorities will be overseen by the United States Agency for International Development. These include rebuilding two international and three domestic airports, ensuring that potable water is available and reconstructing electric power plants, roads, railroads, schools, hospitals and irrigation systems.

Bids sought by the Army Corps of Engineers call for more "expedient" repairs throughout the region that would be controlled by the United States Central Command. These repairs include installing temporary doors, using plywood to cover broken windows and covering damaged roofs with plastic sheeting.

For now, the Bush administration is seeking money under a supplemental appropriation expected to be submitted to Congress shortly.

The companies that have been invited to bid on the work include some of the nation's largest and most politically connected construction businesses. Among them are Halliburton, where Vice President Dick Cheney served as chief executive from 1995 until mid-2000; the Bechtel Group, whose ranks have included several Republican cabinet alumni; and Fluor, which has ties to several former top government intelligence and Pentagon procurement officials.

The final roster of seven bidders has already been narrowed to two or three, and contracts are expected to be awarded this week, according to administration officials.

While those contracts are sizable -- potentially worth more than $1 billion -- they are a pittance compared with the deals to follow, according to Andrew Natsios, the director of United States Agency for International Development, which is overseeing the largest contract put out for bids so far.

But Natsios disputed some of the outside estimates about the reconstruction costs. For example, a report jointly sponsored by the Council on Foreign Relations predicts that it could take $25 billion simply to repair oil export installations and restore the Iraqi electric power system to its status before the first Persian Gulf war in 1991.

But the administration is already poised to decide which companies will initially oversee and carry out the work.

No company has firmer political connections than Kellogg Brown & Root, the engineering and construction arm of Halliburton. Besides its links to Cheney, the company has been a major military contractor since World War II. Most recently, it handled the high-speed construction of the Guantanamo prison compound for terror suspects.

But since last May, the company has also come under scrutiny by the Securities and Exchange Commission, which is investigating how the company has accounted for cost overruns on its construction and engineering work since 1998. And this spring, its shareholders will vote on a proposal, sponsored by two giant New York City pension funds, calling for a review of Halliburton's previous business ties to Iran.

Louis Berger, based in East Orange, New Jersey, could be a dark-horse contender in the Iraq reconstruction sweepstakes. Besides its work on an ambitious pipeline to carry oil from Tengiz, Kazakhstan, to a deep-water port on the Black Sea in Russia, the privately held firm has been an important government contractor in the Balkans for years. More recently, it won a contract to oversee extensive infrastructure development in postwar Afghanistan. The centerpiece of the $300 million contract was the rebuilding of a shattered 600-mile highway from Kabul to Herat.

Bechtel is considered the largest contractor in the country and one of the largest in the world. Its board includes a former secretary of state, George Shultz, and its ranks once included a former defense secretary, Caspar Weinberger.

Bechtel, privately held and based in San Francisco, helped build the Hoover Dam, oversaw work on the tunnel under the English Channel and worked on the cleanup of Chernobyl.

Fluor, based in Aliso Viejo, California, is not currently working on any Agency for International Development projects, but it has extensive experience building petroleum facilities in difficult places. It is building an enormous plant on Sakhalin Island, off Russia's Pacific coast, for an international consortium that includes Exxon Mobil, and is developing oil and gas fields in Kazakhstan for a consortium whose largest member is ChevronTexaco.

Administration officials said they moved swiftly to fast-track bids because they needed to line up contractors with proven track records and high-level security clearances.

"The prime contractors are American, and there's a reason for that: In order to work in Iraq you have to have a security clearance, and the only companies that have security clearances are a certain number of American companies that have done this work before in war settings," Natsios said.