Postwar rebuilding falters over contracts

BAGHDAD -- Colonel David Teeples, commander of the Third Armored Cavalry Regiment in Iraq, can't figure it out. If he can recruit and train members of Iraq's new security force, why can't the Coalition Provisional Authority -- the US-led administration that is running postwar Iraq -- provide them with the uniforms, radios, weapons, and vehicles they need to do their job?

His frustration is common in postwar Iraq -- among Iraqis as much as US forces. More than a year after the US government secretly divvied up the first contracts for postwar reconstruction, much of the subcontracting process remains confusing, overcentralized, and fertile ground for corruption, say watchdog agencies and Iraqi contractors. The equipment so important to Teeples and his recruits, for example, was supposed to be provided under a $327 million contract that was issued in January but was canceled two weeks ago over what the Army said was errors made by contracting officers.

The list of reconstruction contracts and licenses either delayed or under investigation is growing due to what watchdog agencies say is an ad hoc and underregulated selection process. And analysts say it is likely to become more prone to abuse if the United States transfers control over Iraq to an interim government without a strong oversight agency.

"They're still far from an open bidding process," said William Hartung, who recently testified to Congress about postwar reconstruction as a director at the World Policy Institute, a New York-based research center. "The contracting has been chaotic and there are still a relatively small number of companies in a position to benefit."

Pentagon officials acknowledge confusion over the way some subcontracts have been awarded, but say they are working to make the process transparent. "We're putting all the information out there," said Steven Susens, spokesman for the CPA, adding that all applicants meet US standards, with sealed bids. The United States says it will by June 30 transfer sovereignty over Iraq to a local government. With the deadline approaching, charges of cronyism are proliferating as links emerge between winning bidders and Iraqi officials. While allegations of overcharging related to work done by US oil-giant Halliburton Co. have drawn media attention, other less publicized deals and alleged conflicts of interest are raising eyebrows in the United States and Iraq.If coalition efforts to win Iraqi hearts and minds hinge on the integrity of the rebuilding process, the Americans have already lost ground, say Iraqi contractors. Frustration over the country's high unemployment and the slow pace of reconstruction has intensified, they say, because of the perception that foreign companies and a cabal of Iraqi exiles are snatching the best deals. So exasperated are many Iraqis with the contract awards process that many compare it unfavorably with the abusive business practices that flourished under Saddam Hussein's regime. At least back then, Iraqis say, it was clear whom to bribe.

"In the Saddam regime, there was one family, the Tikritis, and you could deal with them," said Kadhim Mohammed al Janabi, who runs a contracting and oil transport company. "Now there are more than 120 parties, plus the people who came from abroad."

Iraqi contractors lament what they say is a bias that favors foreign companies and well-connected Iraqis who spent years living abroad before returning after Hussein's removal. Many members of the Iraqi Federation of Contractors say the winning bids for subcontracting work often go unannounced, which only fuels suspicions of abuse.

"People who have no relation to the coalition or didn't come from abroad don't get any contracts," said Janabi. "It's not clean work."

Those Iraqis who have landed subcontracts say they were helped by their English-speaking skills or personal contact with coalition officials and their translators. Basem Salim and Sami Abdullah say they were awarded a subcontract, finished the contract job quickly, and were rewarded with a larger order to rebuild a police station. But the bidding process is arduous, they say, requiring long trips to a web of contracting offices at military bases or inside the Green Zone -- the coalition's closely guarded headquarters based in Hussein's old Republican Palace.

The Pentagon has opened a central contracting authority in Baghdad, called the Program Management Office, to better manage the rebuilding process. Officials there will oversee how the $18.4 billion approved in October by Congress to fund Iraqi reconstruction will be spent. Last week, the office awarded contracts worth $108 million to companies that will monitor and coordinate design and construction projects.

While government contracts will be handled by Iraqi ministers after June 30, it is not clear what kind of anticorruption safeguards they might adopt. The office will manage US-funded projects for about two years after the hand-over, according to US officials.

Enhanced oversight, say analysts and contractors, is vital to prevent the kind of setbacks dealt by the canceled military supply contract for Colonel Teeples's trainees, which was originally awarded to a Virginia-based company with close ties to Ahmed Chalabi, a prominent member of Iraq's interim ruling council.

The company, Nour USA Ltd., was formed last year specifically to bid on Iraqi reconstruction work and had no previous experience in military provisioning. It beat out 18 other companies for the contract, including Poland's Bumar Group, a state-run arms company, as well as US defense giants Raytheon Co. and General Dynamics Corp.

Nour's president, A. Huda Farouki, has acknowledged that he is a friend of Chalabi's, but he has denied such associations played a role in the award, and he dismissed criticism as sour grapes by competitors.

A new tender for the contract has been scheduled, according to the Defense Department, and could take months to process.

"What is frustrating to me is that a lot of the CPA's resources were tied up in contracts" that were controlled centrally from Baghdad, Teeples said in a recent telephone interview. "What they need is a budgetary process to decentralize and get funds out to the provinces."

In late November, according to the Financial Times newspaper of London, the Pentagon froze licenses worth hundreds of millions of dollars issued to build three cellphone grids in Iraq. The paper said the ensuing probe, which held up cellphone service for months in a country with few working land lines, followed allegations of corruption involving Iraqi government officials and the three Arab consortia that won the licenses. Iraqi Minister of Communications Haider Jawad al-Ebadi denied in an interview last week that the cellphone networks were stalled by a corruption probe, and instead blamed the coalition for failing to provide his ministry with timely assistance in the tender process.

Last month, a watchdog group reported that Iraq's interim government sold much of the country's air industry to a Jordanian firm and a prominent Iraqi family that had little experience in commercial aviation. The New York-based Iraq Revenue Watch said Iraq's transport minister secretly awarded a license for the creation of a new airline and related industries without the knowledge of US officials. A senior coalition official, speaking on condition of anonymity, said he was aware of the Iraq Revenue Watch report and the contract on which it was based. "We'll get to this matter in due course," the official said by email, "or when the mainstream press makes news of it, whichever comes first."