Halliburton off list for rebuilding Iraq

Sorry if this has been posted. Looked and didn't see it.

http://www.chron.com/cs/CDA/ssistory.mpl/front/1842006

March 28, 2003, 11:06PM

Houston company won't get contract
Halliburton off list for rebuilding Iraq
By DAVID IVANOVICH
Copyright 2003 Houston Chronicle Washington Bureau
WASHINGTON -- Halliburton Co. is not among the finalists for a $600 million government contract to help rebuild Iraq.

The Houston-based engineering, construction and oil-field service giant has been culled from a short list of companies bidding to repair Iraq's roads, bridges, schools and other public facilities after the war, a spokeswoman for the U.S. Agency for International Development confirmed Friday.

The federal government had solicited bids from five U.S. firms for the contract. Reports that Halliburton was on the list for a major role in the war reconstruction had created a political uproar, since Vice President Dick Cheney once ran the company.

Two firms are still in the running for the contract, USAID spokeswoman Ellen Yount said. She declined to identify the finalists.

It remained unclear late Friday whether Halliburton had submitted a bid.

Halliburton spokeswoman Wendy Hall declined to comment, referring all calls to USAID.

While it will not serve as the prime contractor, Halliburton could still do significant work as a subcontractor. USAID officials have said about half the value of the contract will filter down to other companies.

The companies reportedly invited in February to bid on for the contract were Bechtel Group, Fluor Corp., Louis Berger Group, Washington Group International and Parsons Group. Parsons Group is said to be allied with Halliburton.

Agency officials had expected to award the contract by Friday. Now a decision is not expected until sometime next week at the earliest.

The winner of the contract will be expected to direct the massive rebuilding of Iraq, repairing not only the damage from the war but the deterioration caused by more than 12 years of political isolation and economic sanctions.

Within the first six months, the prime contractor will be expected to repair at least half the nation's major roadways -- some 1,380 miles worth -- 100 bridges and 3,000 schools. At least 40 percent of the population that had electricity before the war will have to have power by that time, while the water treatment facilities in at least 15 cities will have to be rebuilt by that time.

Federal officials have no illusions that $600 million will be enough to rebuild Iraq. The contract only extends until the end of 2004, with options for another two years worth of work after that.

Estimates of the total range from $25 billion to $400 billion, the Washington-based Center for Strategic and International Studies has said.

Halliburton shares dropped 34 cents to $21.10 in after-hours trading Friday when the news came out. During the regular trading day, company shares dipped 6 cents to close at $21.44.

The Army has a long history of choosing Halliburton for its wartime needs, and the military has generally given it high marks for its performance.

The USAID contract does not cover repair work in Iraq's oil fields.

Earlier this week, the U.S. Army Corps of Engineers handed Halliburton subsidiary KBR -- formerly known as Kellogg Brown & Root -- an exclusive contract to deal with the oil well fires in Iraq.

Halliburton has since hired two oil well firefighting firms, Boots & Coots International Well Control and Houston's Wild Well Control, as subcontractors.

The Army Corps of Engineers contract is only an interim deal to handle emergency work. A more lucrative contract to repair Iraq's deteriorated oil fields will be awarded later after competitive bidding.

Rep. Henry Waxman, D-Calif., has estimated the value of that contract at perhaps "tens of millions of dollars." But the value of that project is not expected to be anywhere near the size of the infrastructure reconstruction project.

Indeed, one source speculated a contract for oil well emergency work was a "sop" for having a real chance to win the large reconstruction contract.

The oil well fires contract was signed on March 8 but was not announced until March 24.

"We were under restrictions not to talk about it at the time," it was awarded, Army Corps spokesman Scott Saunders said.

Halliburton faced no competition for the oilfield contract. In November, the Pentagon, fearing a conflagration similar to Kuwait 12 years ago, had hired the firm to draw up a plan to deal with any oilfield fires. That report, which was classified, put it in place to execute the plan.

The company said it was chosen because it was "the only contractor that could commence implementing the complex contingency plan on extremely short notice."

KBR also was the only contractor that saw the report.

That practice, of a contractor writing a classified report and then getting the job of implementing the plan, is not unusual, noted P.J. Singer, a fellow at the Brookings Institution and author of the upcoming book Corporate Warriors: The Rise of the Privatized Military Industry.

"It's happened before," Singer said. "It's a practice across the industry. It's not a Halliburton thing."

While Halliburton's contract may be limited, the award has raised hackles from West Texas to the south side of the Capitol.

"This entire deal stinks," said Bob Grace, who helped put out oil well fires in Kuwait after the Persian Gulf War.

Grace, president of the Amarillo-based petroleum engineering firm GSM, complained that "there were no other companies considered. It is a `fox-in-the-henhouse' deal. There was plenty of time to consider all who are in this business of oil well firefighting. I will be interested to learn how much of a premium the taxpayers are being charged as a result of no bidding or consideration of others."

The Halliburton contract is what's known as a "cost-plus" contract. That means the company will be compensated for its costs and then receive an additional 2 percent to 5 percent on top of that.

Waxman has written Lt. Gen. Robert Flowers at the Corps of Engineers, asking him to explain more about the Halliburton contract by the end of next week.

 

Thanks for the birthday wishes, fellas.

I'd like to point out, by the way, that I've never been a party to the "blood for oil" argument. It did smell funny that Haliburton was going to profit (as did Cheney refusing to make public the members of his energy task force), but my concerns about this war are different.

Birthday's going swimmingly, by the way. Anybody wants to buy me a Lone Star, I'll be at the Axiom tonight. They're only $2. It's a cheap gift.