April 29, 2003
The truth about Bechtel and the USAID Iraq contract
Bechtel Responds to Inaccuracies in the Media Coverage of the Usaid in Iraq Infrastructure
Bechtel’s record of success reflects performance, not politics
A number of news reports and Web postings have introduced or perpetuated inaccuracies about why Bechtel won a contract for reconstruction in Iraq from the U.S. Agency for International Development (USAID). Here are the facts:
FACT: Bechtel won the Iraq contract on its merits.
FACT: Bechtel engages in the political process legally, openly, and appropriately.
- The U.S. Agency for International Development (USAID) conducted its selection in an objective and competitive process that followed Federal Acquisition Regulations. Bechtel was one of seven competitive bidders USAID invited to bid. Each was judged on competence, performance, experience, and capabilities. Bechtel is proud to have won on the merits.
- As USAID Administrator Andrew Natsios told CNBC (April 18, 2003): “I told the career staff, the career foreign services officers and civil servants, to keep all political appointees out of the process from the beginning. They chose the seven companies based on their records of having done work with AID or the federal government, of knowing the federal accounting system, federal procurement law, having no legal efforts against them now or no audit findings by the IG [Inspector General], in terms of AID’s records. They chose them. I did not know who they chose. . . . I asked our senior foreign service officer, who is the head of procurement, a man of great integrity, I said, ‘Why were they chosen?’ He said they had one of the lowest prices with the highest technical reviews."
- Industry experts concur. " Without a doubt, they are the most ready because of their long-standing work in the region,” said Joseph A. Ahearn, vice chairman of CH2M-Hill. (Quoted in Engineering News-Record, April 28, 2003)
- As evidence that politics did not enter into the process, note that three winners of USAID contracts for Iraq made no contributions at all to Republican candidates from 1999-2002. (International Resources Group; Research Triangle Institute; Creative Associates Int’l)
- Proven record: Bechtel is one of the world’s largest and most experienced engineering and construction companies. Since 1898, Bechtel has completed 20,000 projects in 140 nations on all seven continents. Bechtel has worked in the Middle East for 60 years. Notable accomplishments include Hoover Dam, Bay Area Rapid Transit, Hong Kong Airport Core Programme, Channel Tunnel, Jubail Industrial City, Athens Metro, the Jeddah and Riyadh international airports, Croatia Motorway, Three-Mile Island nuclear cleanup, build-out of wireless networks for AT&T and Cingular Wireless, and many others.
- In 2002: Bechtel had 900 jobs ongoing in nearly 60 countries.
- One senior British government adviser told the Independent (UK), "Bechtel has skills that the UK doesn’t have. Managing big, complex projects is bread and butter for Bechtel. . . . Bechtel gets results by throwing highly skilled people at problems. . . . they get the job done." (April 20, 2003)
- As Bechtel CEO Riley Bechtel told employees, “We won this work on our record, plain and simple. We have a decades-long record of experience and performance on tough jobs under tough conditions, including the Kuwait oil fires and scores of other projects in the Middle East and around the world. It’s a record that few, if any, companies in the world can match. Any implication that we won this work as a result of anything other than our capabilities discredits our record, and the great work you do and will continue to do. “ (April 21, 2003)
FACT: Bechtel does not rank among the top corporate political contributors and is relatively even-handed toward the two major political parties.
- We do engage in the political process, as do most companies in the United States. We are proud of being a part of the process.
- We have legitimate policy interests and positions on matters before Congress, and we express them in many ways, including support for elected officials who support those positions. This is legal, ethical, and common. We do not expect or receive political favors or government contracts as a result of those contributions.
FACT: Often-cited examples of Bechtel’s “friends in high places” are specious or irrelevant.
- We are not a leading corporate contributor. According to Reuters (April 4, 2003): “Bechtel’s donations look small compared with those of software giant Microsoft Corp., which gave $4 million during the past two years alone . .”
In the last 12 years, Bechtel’s political action committee (PAC) has ranked among the top 20 construction PACs only twice.
- The average contribution by Bechtel’s PAC is $1700, less than one-fifth of the allowable limit to a congressional candidate.
- Bechtel ranked 189th out of 716 organizations whose “soft,” or corporate, money was tracked in the 2001-2002 election cycle. Bechtel’s soft contributions, which ended after enactment of the Bipartisan Campaign Reform Act (BCRA), were evenly balanced between the major parties. In the most recent election cycle (2002), among the competitors for the USAID contract, Halliburton and Parsons gave 100 percent of their “soft money” to Republicans, Washington Group gave 78 percent to Republicans, and Bechtel gave 52 percent to Republicans.
- For the 2000-2002 election cycle, Bechtel’s PAC gave considerably less to congressional candidates than did those of Fluor, Halliburton, Washington Group, and Parsons (competitors for the USAID contract Bechtel was awarded).
In the last three election cycles, construction industry PACs have leaned heavily in favor of Republicans, never closer than 74-26 for Republican candidates. Bechtel’s PAC is more balanced; its spread was never more than 60-40.
Through endless repetition, rather than facts, Bechtel has gained an undeserved reputation as a secretive company that succeeds through powerful friends in high places. People who check our Web site, read our annual report and other publications, or call us with questions know that we are far from secretive. And the people who know us best—our customers—know that our reputation for excellence is grounded in a proven ability to get the job done well, along with an uncompromising commitment to integrity, honesty, fairness, and safety.
Over the years, we have certainly built good relationships with important people. We network like anyone in business or the professions. Bechtel executives have been international industry leaders for decades. Industry leaders know political leaders, the people who formulate development plans, control budgets, set the rules for contractors to enter and operate in their countries, examine credentials, authorize contracts, and pay the bills for services rendered.
But the implication that Bechtel wins business or succeeds in a highly competitive marketplace through political connections is misguided and false:
As is the case with many companies that are leaders in their industries, our senior management and technical experts are asked by U.S. administrations of both major parties to lend their expertise by serving on councils and committees at all levels of government.
- George Shultz, a member of Bechtel’s board of directors, has not had a management role at the company for 23 years. [Update: Shultz retired from Bechtel's board in April 2006.] He did not exert any influence in the awarding of government contracts for work in Iraq to Bechtel. Shultz spoke for himself, not for Bechtel, in advocating intervention against the regime of Saddam Hussein. As a former secretary of state, he is hardly shy about taking public stands on international affairs. Contrary to mistaken critics, he played no role as secretary of state in promoting a Bechtel pipeline project in the 1980s.
- Caspar Weinberger, former general counsel and director, left Bechtel nearly a quarter century ago to join the Reagan administration as secretary of defense. He has had no role in the company since.
- William Casey, the late CIA director, was never an employee or consultant to Bechtel—contrary to irresponsible claims from the Center for Responsive Politics, a so-called “watchdog” group in Washington, D.C., that apparently does not watch itself. Beware: Many journalists have recited its claim without checking.
- Riley Bechtel, Bechtel’s chairman and CEO, was a member of the President’s Export Council from February 2003 to December 2004. He was one of 27 individuals appointed to advise the president on programs to improve U.S. trade performance. His appointment was based on the fact that Bechtel has exported services to 140 countries around the world.
- Jack Sheehan, senior vice president and project operations manager for Bechtel’s petroleum and chemicals business, came to Bechtel in 1998 after a career in the U.S. Marine Corps. He served on the Defense Policy Board, which advises the Secretary of Defense on a variety of issues. His corporate connections were fully disclosed in government filings to prevent conflicts of interest, and he did not lobby on behalf of Bechtel. In a study released in March 2003, Center for Public Integrity concluded that that “Defense companies are awarded contracts for numerous reasons; there is nothing to indicate that serving on the Defense Policy Board confers a decisive advantage to firms with which a member is associated.” In any case, the Iraq reconstruction contract was issued by USAID, with no direction from the Department of Defense.
- Ross Connelly, former president of Bechtel Energy Resources, Inc., left Bechtel in 1995 and has not been employed by the company since. According to opic.com, he joined the Overseas Private Investment Corp.— the agency that guarantees U.S. investments around the globe—in 2001.
FACT: The Iraq contract is not a giant windfall for Bechtel
- Bob Baxter, former president of our Civil global industry unit, was appointed in 1998 by the Clinton administration to serve on the Advisory Committee to the President’s Commission on Critical Infrastructure Protection.
- Larry Papay, former general manager of Bechtel Technology & Consulting, was asked in 1997 by the Clinton administration to participate in the Panel on Energy R&D of the President’s Council of Advisors on Science and Technology.
In a low-margin business, Bechtel’s actual earnings from its work are only a small fraction of contract totals. Bechtel’s contract with USAID totals $680 million. That sum is certainly significant, and Bechtel is proud to do the job, but most of the work will be subcontracted and will go toward equipment and materials. By comparison, Bechtel currently has a $1.7 billion aluminum smelter project in Bahrain and just won a $1.5 billion airport expansion project in Saudi Arabia. Figures of $100 billion bandied about by critical columnists are guesstimates of the total cost of rebuilding Iraq – not of the resources that will actually become available for private-sector work in Iraq.
FACT: The Aqaba pipeline project has been misrepresented and has no bearing on the USAID contract.
In the mid-1980s, Iraq and Jordan considered (and then rejected) hiring Bechtel to manage construction of a pipeline to carry oil from Iraq to Aqaba on the Red Sea, avoiding dangerous shipping lanes in the Gulf. Bechtel held numerous discussions with U.S. government officials to ensure alignment with administration policy and to seek loans from the U.S. Export-Import Bank. Aiming to safeguard U.S. economic security, the administration backed several alternative pipelines, not just the Aqaba proposal. Secretary of State George Shultz, former president of Bechtel, properly recused himself from the matter and at no time promoted the Aqaba pipeline, contrary to recent reports based on a demonstrably mistaken reading of the documentary record. There is no connection between the Aqaba proposal and the recent Iraq reconstruction project.
BOTTOM LINE: Journalists have a responsibility to assess the credibility of claims rather than uncritically reporting innuendo from partisan organizations and political critics.