October 31, 2003
Getting the Facts Straight: Bechtel's Response to Allegations About its Work in Iraq
A number of inaccurate and misleading statements have been made recently regarding Bechtel’s work under the U.S. Agency for International Development (USAID) in Iraq, suggesting that Bechtel has won sweetheart deals, overcharged the federal government, and failed to employ Iraqis. These charges simply are not true. It is important to get the facts straight about such allegations, including those made by Congressman Henry Waxman in a recent letter to the U.S. Office of Management and Budget and subsequent interviews.
Critics claim: Bechtel won a no-bid contract.
Bechtel’s contract with USAID for the Iraq Infrastructure Reconstruction work was awarded in April 2003 after a competitive process in which seven companies were invited to bid. USAID conducted its selection using objective criteria that followed Federal Acquisition Regulations. Each competitor was judged on competence, performance, experience, and capabilities.According to USAID, Bechtel was selected because we demonstrated the highest technical competence at one of the lowest costs.
Many critics, apparently including Congressman Waxman, have confused the USAID contract competitively awarded to Bechtel with the noncompetitive award to Halliburton/KBR by the U.S. Army Corps of Engineers. These are two completely different contracts awarded by different agencies according to different procedures. Each deserves to be evaluated on its own merits.
Critics claim: Bechtel “wanted to charge $15 million” to rebuild a cement plant in Iraq.
Congressman Waxman’s story about the cement plant has nothing at all to do with Bechtel. Bechtel did not provide any estimate, did not make a proposal, and is not involved in any way. In fact, we have no information on any plans to rebuild such a plant.
Critics claim: Bechtel rejected Iraqi contractors for lack of insurance.
At no time has Bechtel disqualified Iraqi subcontractors due to a lack of insurance. Normal insurance requirements for subcontractors have been waived on this project.
Critics claim: There has been a “lack of transparency" in Bechtel's work in Iraq.
Within five weeks of contract award, Bechtel launched a series of conferences for contractors in Washington, D.C., London, Kuwait City, Baghdad, and Basrah to lay out the scope of our work, clarify government contracting to local contractors, present a simplified procedure for qualifying contractors, and demonstrate how interested firms could register. More than 6,500 people attended these conferences and over 10,300companies have registered their interest in doing work on this project. Bechtel has also posted the conference presentation and handouts on this Web site for those who could not attend. As of late October, the Iraq Project section of our Web site has been visited over 200,000 times since May by people reading and downloading this information.
Bechtel maintains an office in the Baghdad Convention Center with Arabic-speaking staff to make it easy for Iraqis to register and qualify their firms simply by completing a contractor questionnaire. Iraqi contractors that complete the questionnaire are listed as registered bidders. We have so far identified more than 1,000 qualified contractors in this way. Information on all subcontract awards is a matter of record, although details about exactly which Iraqi companies have won contracts are not routinely publicized in the interest of security.
We have met with more than 100 members of Congress in Iraq and Washington, D.C., as well as with business leaders and international governmental delegations on an ongoing basis. We also provide every member with fact sheets and background information on a regular basis, as well as an open offer of detailed follow-up briefings. We publish news releases and other information on our Web site and in regular reports to Congress. We have responded to thousands of media inquiries from around the world and worked with scores of journalists who are in Iraq.
Three different U.S. government agencies oversee our technical and financial performance in Iraq: USAID, the Defense Contract Audit Agency, and the U.S. Army Corps of Engineers. All of our work in Iraq is subject to close and constant inspection and audit.
Critics claim: Bechtel is not awarding work to Iraqis.
As of October 24, 2003, Bechtel had awarded 110 of 149 subcontracts to Iraqi firms. Before the work is completed, more than 40,000 Iraqis will have been employed by Bechtel and its subcontractors in the extraordinary effort to reconstruct their nation. In order to increase the cost-effectiveness of the work, and to help revitalize the Iraqi economy, Bechtel decided to award the vast majority of the subcontracting work to small Iraqi subcontractors. We are subcontracting 90 percent of the workhours performed on this project, 70 percent of which will go to Iraqi firms. With the exception of the port dredging (because it required a very large dredger not available in Iraq), security, and vendor representatives for high-tech equipment and camps for staff, most of the work we have awarded to date has gone to small Iraqi contractors.
Because many small Iraqi contractors do not have sufficient working capital to perform the work, Bechtel instituted a program to advance funds to many of these contractors, at no cost to them.
Nearly all of the telecommunications work is being performed by Iraqis, the rail work near Basrah is all Iraqi, the bridge repair workers are all Iraqi, the water and wastewater work is all being completed by Iraqi contractors, and nearly all of the power work is being completed by Iraqis. Over 30,000 Iraqis worked with us on the program that refurbished over 1,200 schools in time for the beginning of school this fall.
Bechtel has more than 100 Iraqis on staff as engineers, procurement agents, and subcontract administrators in Iraq. Many of the Iraqis currently employed now were employees of Bechtel on pre-1991 projects and eagerly sought re-employment because they were treated professionally.
Critics claim: Bechtel has a “cost-plus” contract.
Bechtel’s contract has a fixed fee. Bechtel does not earn additional fee by subcontracting out to specific companies or workers of any given nationality.
We do not earn more by using any specific contracting or procurement practices because the fee is fixed.
The decision by USAID and Bechtel to structure a work program to maximize the use of Iraqi subcontractors and workers was made last spring because it is the right thing to do, is cost-effective, and helps stimulate the Iraqi economy.
The Record of Accomplishment
Bechtel stands proud of the contribution the men and women on the project are making to this critical postwar effort. Bechtel's Iraq Infrastructure Reconstruction Project team, working alongside thousands of Iraqi workers, is making remarkable progress in rebuilding a country torn apart by three wars and more than 30 years of terror and neglect under the Saddam Hussein regime.
To date our partnership has:
- Reopened Iraqi's only deep-water port, Umm Qasr, allowing 22 million Iraqi citizens to receive hundreds of thousands of tons of food and humanitarian supplies.
- Refurbished more than 1,200 schools so they could be reopened for the first day of the new school year.
- Constructed the Al Mat Bridge bypass on Highway 10 in western Iraq to allow 3,000 vehicles a day to deliver food, goods, and supplies to the Baghdad area from Amman, Jordan.
- Steadily increased the supply of desperately needed electricity to Iraqis despite ongoing sabotage and destruction of the power infrastructure. As much as 4,450 megawatts are being generated, restoring electricity generation to preconflict levels, up from 2,600 MW last summer.
- Begun providing a cleaner water and wastewater system for more than 5.5 million Iraqis. Work includes constructing new water treatment facilities, repairing pump stations, refurbishing sewer systems, and training Iraqi personnel in correct operating procedures. In Basrah alone, this project will double the flow of clean, healthy water to the city.
- Installed communications systems and provided emergency power generators to support the opening of both the Baghdad and Basrah airports for limited international commercial service.
- Worked to restore telephone service to 240,000 Baghdad area subscribers by replacing switches and transmission equipment at 12 destroyed exchanges. We are also installing a satellite link to support international calls and restoring the country’s main north-south fiber-optic backbone.