Cronies set to make a killing
Oliver Morgan and Ed Vulliamy on the chequered past of US firms in the frame
Sunday April 6, 2003
Andrew Natsios, head of the US Agency for International Development, set out last week to counter accusations that $600 million worth of contracts for reconstruction in Iraq that he is to award to US companies, some with strong Republican links, were examples of cronyism.
'If you need a surgeon, a lawn service, a real estate agent or a college, you seek out the names with the reputation for quality and the ability to get the job done,' he said. Strange, then, that a front-runner is construction giant Bechtel, whose record in managing America's biggest public works project has been, by most accounts, disastrous. Only last week, Bechtel's record in managing the 'Big Dig', a £14.8bn project to burrow a highway under Boston, was criticised at a public hearing in the city.
The project dates back to 1985, when it was costed at $3.5bn. Severe complications mean it will be completed only next year, and last week's hearings were about who was to blame - the state or private contractors, led by Bechtel and New York-based Parsons Brinckerhoff.
Natsios should know all about this: in fact, he was invited to give evidence but said he was too busy 'directing the relief and construction effort in Iraq'. The reason for the invitation was that between 2000 and 2001 he was chief executive of the Massachusetts Turnpike Authority, the organisation with responsibility for the Big Dig.
According to Senator Robert Havern, chairman of the Massachusetts Joint Transportation Committee, it was when Natsios was Turnpike chief that the biggest rise in costs, from $10.8bn to $14.7bn, took place. Havern says: 'This is the biggest works project in the history of America, and it is the largest cost overrun of any project.' He thought some of the fault would be Bechtel's, and was surprised Bechtel was in consideration for Iraq. 'I cannot believe that he [Natsios] would not, with the knowledge he has from here, be very sceptical.'
Bechtel is a powerful company, with links to the Republican Party at the highest level going back to the 1980s, when senior executives such as George Shultz were appointed to the Reagan administration. The company put in a bid to build an oil pipeline from Iraq to Aqaba on the Red Sea, a project first mooted by Shultz at the US State Department. It would dearly like to return to Iraq.
Another company until recently in line for the $600m contract is the Halliburton subsidiary Kellogg Brown & Root, whose connections are even more impeccable --Vice- President Dick Cheney was formerly chief executive - and whose contributions more generous. It has ruled itself out of the bidding for the $600m contract, which observers say suggests it has woken up to the possible political damage. But it aims to team up with Parsons, still in the bidding, as a sub-contractor, and has a lucrative deal to tap oil well fires in Iraq. Most of all, it is poised for the main area of US spending in post-war Iraq: maintenance of the military - building houses, barracks, water systems, and operating everything from heavy equipment to mail and laundry.
When George Bush went to Congress to ask for $65.6 billion for the war, he earmarked $2.4bn for aid and reconstruction, with $17bn for other post-war costs. According to Pratap Chatterjee, of California-based CorpWatch, the Halliburton subsidiary still stands to make a killing. 'The main money is not in reconstruction; the main money is in supporting the troops. Whoever gets that money will be running all the bases for an army that is not going to leave. Around 80 per cent of the budget goes to the military, and the rest on reconstruction.'
The US garrison in Iraq will dwarf that in Afghanistan. In December 2001, KBR secured a 10-year contract from the Pentagon that enables it to run military related projects anywhere in the world, for a guaranteed profit. So far, KBR has netted $830m from the programme.
Natsios may well thank KBR for bowing out of the main construction contract. But with Halliburton's designs on other deals, his knowledge of Bechtel's Boston record, and claims that Fluor, another of the major bidders, has an unsavoury past in South Africa, his task remains complicated and controversial.