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Bechtel Corporation Receives Iraqi Reconstruction Contract

By David Streitfeld and Mark Fineman

The federal government on Thursday selected San Francisco’s Bechtel Group for a sweeping $680 million contract to oversee the rebuilding of Iraq, a massive task that will involve everything from airports, schools, roads, bridges and railroads to its power grids, water systems and sewers.

So critical is this work to America’s postwar presence in the wounded nation that the 98-page request for bids secretly sent out to a handful of American companies declared it essential to keeping the peace there.

Bechtel said it was “honored” to have been selected by the U.S. Agency for International Development. Even critics conceded the task was extraordinary.

“This has never been done before -- an American corporation rebuilding an entire foreign country,” said Danielle Brian, executive director of the D.C.-based Project on Government Oversight.

The government said Bechtel will initially get $34.6 million under the contract, which provides for up to $680 million during the next 18 months. But USAID officials said the total will be far higher. Experts say it will cost tens of billions of dollars to fulfill the agency’s goal of creating “the fundamental structures for democracy and economic growth.”

Bechtel said it had already started working with USAID to “prioritize and detail” what needs to be done.

The company’s next step is to find subcontractors. Bechtel will be responsible for coordinating construction work by dozens of subcontractors employing thousands of workers.

“It will be a full and open and international bidding process,” Bechtel spokesman Mike Kidder said.

None of that was true in the first round. The size of the contract -- the biggest of eight being awarded by USAID, for a total of $1.7 billion -- and the fact that it was cloaked under the veil of national security drew criticism from Capitol Hill and government watchdog groups. ‘A troubling pattern is starting to emerge,” said Sen. Ron Wyden, D-Ore. “We’re seeing some of the country’s most powerful business interests showing up and getting these contracts. That ought to set off bells.”

Wyden is co-sponsoring a bill to force public disclosure of Iraq contracts awarded without open, competitive bidding. The General Accounting Office, Congress’ investigative arm, has launched a wide-ranging investigation as well. An amendment to the $80 billion war-spending bill President Bush signed this week allocates more than $4 million for AID’s inspector general to monitor and audit money spent in Iraq.

Bechtel, which was founded in 1898 by Warren Bechtel and is closely controlled by his descendants, built the Hoover Dam in the early 1930s. Other major company projects include the San Francisco-Oakland Bay Bridge, the Trans-Arabian Pipeline, the Bay Area Rapid Transit System and the English Channel Tunnel.

Bechtel has often worked on military as well as other government contracts, including the Yucca Mountain nuclear waste disposal site and the Idaho National Engineering and Environmental Laboratory.

Like many companies that work extensively with the government, it has been a large political contributor: $1.3 million to federal campaigns and candidates over the last three years, according to the Federal Election Commission. Fifty-nine percent of the money went to Republicans and the rest to Democrats, records show.

Over the decades, Bechtel has been closely tied to the government in other ways, too. George Shultz, treasury secretary for President Nixon, stepped down in 1974 to become president of Bechtel. In 1982, Shultz became President Reagan’s secretary of State. Shultz is currently a member of Bechtel’s board. Caspar Weinberger was a Bechtel director, vice president and general counsel before becoming Reagan’s secretary of defense in 1980.

Officials have stressed that politics played no role in awarding the contracts. USAID administrator Andrew S. Natsios emphasized that all 123 employees in the agency’s procurement division are career civil servants, and that he and all other political appointees are legally barred from participating in the process. The procurement staff awarded the contract after evaluating the companies’ capabilities and reviewing the cost estimates.

Nevertheless, the company is a lightning rod for activists. Bechtel’s headquarters in San Francisco’s financial district was the scene of several demonstrations as the war began at the end of March. Even after the protesters stopped coming, the company left the crowd control barriers up in front of its building, just in case.

Bechtel has been the subject of more substantive criticism too. In Boston, Bechtel has come under fire for its co-management of the Big Dig project to replace a 7.5 mile elevated highway with an eight-lane underground tunnel.

Over its nearly 20-year history, the cost of the project has ballooned from $2.5 billion to $15 billion. The state government is investigating whether Bechtel is responsible for making mistakes that total more than a billion dollars.

“They were in charge of the biggest infrastructure project in the history of America and they screwed it up,” said Brian of the Project on Government Oversight.

Bechtel has defended itself vigorously and says the criticism is “fundamentally flawed.”