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Wednesday, April 16, 2003

Iraq: Well-connected contractors


Competitive bidding

U.S. contractors need to be as competent in helping rebuild Iraq as U.S. forces were in removing Iraq's murderous regime, if this second Iraq war is to be judged a success. Already the political wars over contracts have begun, and Vice President Dick Cheney's former company Halliburton is in the thick of it.

Before anyone knew how many oil wells would be torched, the Pentagon had to line up veteran companies who work fast and have security clearances. But now that the major battles are over, U.S. agencies should shed the secrecy, halt open-ended contracts and use competitive bidding.

Halliburton declined to bid as prime contractor for a huge rebuilding contract, but remains a major subcontractor in other bids, and its subsidiary KBR was awarded a no-bid open-ended Pentagon contract which the New York Times reported could be worth as much as $7 billion over two years.

Iraqi oil belongs to the Iraqis, and should help rebuild Iraq. With the world's second largest reserves of crude oil, Iraq could become a rich nation instead of just a bankroller of Saddam's palaces. Under sanctions, Iraq's oil-for-food sales were required to go through the United Nations. Even after sanctions go, the U.N. food distribution system could be used to spread oil proceeds to Iraqis.

Oil production needs to be quickly restored, but Iraq's neglected oil industry needs major investment. Other physical infrastructure also needs rebuilding - war-damaged roads, bridges, airports, hospitals, schools, utilities. Cost estimates range from $30 billion to $100 billion. Congress's war budget bill approved $75 billion for defense costs and an initial $2.5 billion for rebuilding. The House bill banned U.S.-financed contracts from going to French, German, Russian or Syrian bidders. Even the British, coalition allies, were upset the first contracts went exclusively to U.S. firms.

Coalition nations who put blood and treasure on the line should be rewarded first. Iraq could benefit, as did post-war Japan and Germany, from leapfrogging to advanced western technology. But as soon as it's safe, the United States needs to hand over decision-making control to Iraqis. All the more reason to make sure that rebuilding contracts are awarded for competence, not connections.