AID plans to contract out oversight of Iraq contracts

The U.S. official in charge of awarding reconstruction work in Iraq to American companies said Monday that he is "worried about the administration of these large contracts" that have been awarded in recent weeks. The U.S. Agency for International Development plans to hire other firms to provide oversight of contractors in the country.

U.S. firms, most notably San Francisco-based engineering giant Bechtel, have won nearly $1 billion in contracts to revitalize and rebuild the Iraqi infrastructure in the wake of U.S. military operations there. AID plans to obligate an additional $1.7 billion over the next four months.

But there are only four contracting officers from AID in Iraq now, said Timothy Beans, the acting director of AID's Office of Procurement. In order to ensure that Bechtel and other firms are performing under the terms of their agreements, the agency plans to contract out oversight soon. Beans said he wasn't sure whether the oversight contract would be fully open for competition, but said he hoped it would be.

Several Washington-area firms specialize in contract management and oversight, many of them run by former government officials. AID also plans to enlist the Army Corps of Engineers to help oversee Bechtel's work, Beans said.

AID's process of selecting firms to compete for work-and in some cases making awards with no competition at all-has raised concerns about the fairness and openness of awarding potentially tens of billions of dollars in Iraq reconstruction work over the next several years. Last week, Sen. Joseph Lieberman, D-Conn., the ranking member of the Governmental Affairs Committee, urged congressional hearings on the no-bid award of a contract to extinguish Iraqi oil well fires to Halliburton, a firm once led by Vice President Dick Cheney. Lieberman also said Congress should look into contracts awarded through a selective bidding process-like the one granted to Bechtel, in which only seven firms were invited to bid.

The General Accounting Office has launched an investigation of AID's procurement process, and Beans joked that the agency's inspector general had set up an office next to his.

Beans made his comments Monday to an audience of business executives in Washington who'd gathered to hear what he and other current and former government officials had to say about winning reconstruction business. The panel's message was clear: companies should move now to become subcontractors to Bechtel and other firms that have won the handful of contracts issued so far.

"Follow the money," said Ray DuBois, a senior Pentagon official. Rather than looking to the government for opportunities, companies should be "burnishing [their] relationships with Bechtel," said DuBois, the Defense deputy undersecretary for installations and environment.

DuBois, who served Donald Rumsfeld during his first term as Defense Secretary in the 1970s and works closely with him now on reconstruction issues, told executives that they should "face facts" and gauge how successful their efforts will be based on the connections they've been able to establish with the major players. DuBois noted that Bechtel is holding a conference in Washington on Wednesday for interested subcontractors. That gathering is expected to draw a large crowd.

Ray Pushkar, a partner with Washington law firm McKenna, Long and Aldridge who specializes in government contracts, echoed the consensus that the government should not be viewed as the central source for business opportunities. "I would encourage everyone in this room…to see if they can have a piece of the action by getting on [Bechtel's] bidders list" of subcontractors, he said.

Pushkar raised concerns, however, about the scope of Bechtel's reconstruction contract, which he said contains provisions that allow the firm to modify the scope of the work without holding subsequent competitions among subcontractors.

Beans said Bechtel executives have assured him and AID Director Andrew Natsios that the firm will compete subcontracts. He noted that he preferred not to see Bechtel simply tap the companies with which it has done the most business in the past.

Natsios has issued a waiver allowing U.S. contractors to hire foreign firms. However, the question of whether companies from nations that opposed the U.S.-led invasion of Iraq will actually win any work has been a source of controversy.

The Pentagon's DuBois said it should come as no surprise that Rumsfeld wants companies from the United States and its partners in the effort to oust Saddam Hussein, which include Great Britain, Spain and Australia, to have a "leg up" on other competitors. He noted that while noncoalition countries aren't prohibited from winning, those who supported the U.S. "may be looked upon more kindly."

Asked by a member of the audience what assurances Bechtel had given the government that it would enlist foreign companies as subcontractors, Beans said, "I don't want to answer for Bechtel."