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Iraq/Afghanistan: U.S. Report Raises Questions About American Contracting

Antiwar activists accused the Bush administration of waging war in Iraq in part to profit from that country's vast petroleum riches. But a new study on American government contracts awarded in Iraq and Afghanistan shows that the real riches -- some $8 billion worth -- have gone to 70 U.S. companies for contracts to rebuild the country. Those same firms also have close ties to U.S. officials and contribute heavily to Republican and Democratic election campaigns.

Washington, 3 November 2003 (RFE/RL) -- If there's one thing that pays well in Washington, it's to know the right people.

That seems to be the main accusation of a report released last week by the Center for Public Integrity, a Washington-based research group that produces investigative articles on special interests and ethics in government.

The study found that U.S. companies who have been awarded $8 billion in contracts to rebuild Iraq and Afghanistan also have been major campaign donors to U.S. President George W. Bush -- a Republican -- and that their executives have important political and military connections.

Charles Lewis, the Center's executive director, presented his group's findings in Washington after the General Accounting Office (GAO) -- the research arm of the U.S. Congress -- opened two separate investigations into possible improprieties in awarding government contracts in Iraq and Afghanistan.

"For the democracy and for the country, I think the public has a right to know what's going on with these contracts," Lewis said. "And I hope the General Accounting Office, which is capable of doing very impressive work, that they can do a thorough investigation. And if there is a problem, and these are serious [problems] as they initially look, that something does happen."

The GAO probes were launched after complaints were filed by Democratic congressmen about possible abuses, including questions about the largest deal -- a $2.3 billion no-bid contract given to Halliburton, the oil and military services firm once headed by U.S. Vice President Dick Cheney, who continues to receive deferred payments from the Texas firm.

Other major contracts for Iraq and Afghanistan were awarded by the Bush administration without competitive bids, because federal agencies said competition would have taken too long to meet urgent needs in both nations.

But Lewis said such contracts leave a trail of unanswered questions that suggest the procurement system is full of waste, fraud, and cronyism.

In fact, the Center for Public Integrity concluded that most of the 10 largest contracts went to companies such as Halliburton and Bechtel that employed former high-ranking government officials or executives with close ties to members of Congress and even the agencies awarding the contracts.

The report's contention that there exists a virtual "revolving door" between government agencies and the boardrooms of major government contractors sparked some lively questions at the 31 October State Department media briefing.

Barry Schweid, a veteran diplomatic writer for the Associated Press, asked State Department spokesman Richard Boucher about the appearance of favoritism that exists when key government positions are filled by former executives of major government contractors, such as Bechtel.

"From there come the secretaries of defense, and state and the vice president, and then they go back and they work for the same companies," Schweid said. "And it's one cycle. And there's an appearance I don't know of what -- an appearance of favoritism. And, of course, they've got experience -- they've gotten contracts in the past."

"An objective look at the process shows you that it is an open process, it is transparent, and it's done fairly, as the government requires. It's done fairly in order to get the right people to do the work that needs to be done to rebuild Iraq," Boucher countered.

Boucher also defended the huge contracts awarded to Halliburton and Bechtel against accusations that they won the contracts simply because of their political connections.

"Firms who can do the jobs, firms with major international presence, with the capability of building schools, roads, hospitals for the Iraqis, dredging ports, doing all the work that needs to be done -- that those firms should somehow be excluded from the opportunity to bid because someone in the administration once worked for them, I don't think that would make sense," Boucher said.

Some contractors, such as Halliburton, which performs a wide range of specialized work and was responsible for dousing many of the oil fires that raged in Kuwait after the first Gulf War, say they often win contracts just because they're the only ones truly capable of doing such difficult work.

But Lewis from the Center for Public Integrity takes issue with that notion, saying Bechtel and Halliburton have a virtual stranglehold on contracts.

"There is a feeling inside the business community, inside the contractor class, that this process is skewed," said Lewis. "And I don't accept for a moment that they're the only two companies on planet Earth. I think that's a ludicrous comment for them to make, and I'm offended by it."

Halliburton's top executive, Dave Lesar, said last week that he is offended by criticism of the company's Iraq work but believes it is, "less about Halliburton and more about external political issues."

"As a company uniquely qualified to take on this difficult assignment, we will continue to bring all of our global resources to bear at this critical time in the Middle East," he said. "We have served the military for over 50 years and have no intention of backing down at this point."

Bechtel was second with a $1 billion capital construction contract involving Iraq's utilities, telecommunications, railroads, ports, schools, health-care facilities, bridges, roads, and airports.

The company's website says, "We do engage in the political process, as do most companies in the United States. 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.

"We do not expect or receive political favors or government contracts as a result of those contributions."

The study also found that money from half of the contracts awarded ends up going to subcontractors. Lewis suggested that this is a further waste of U.S. taxpayers' money, but Boucher defends the practice.

"On one of these Bechtel contracts, I remember there were 140 subcontractors, 102 of whom were Iraqi firms. So that's another goal is to get the employment, to get the Iraqis involved in this business," Boucher said.

The study by the Center for Public Integrity -- of more than 70 U.S. companies and individual contractors -- turned up more than $500,000 in donations to Bush's 2000 election campaign, more than they gave collectively to any other politician over the past decade.

The study also shows that besides Halliburton, many of the companies with large contracts have important political connections:

-- Former Secretary of State George Shultz is on Bechtel's board of directors.

-- David Kay, head of the Bush administration's search for weapons of mass destruction in Iraq, is a former vice president of Science Applications International Corporation, which is running the Iraqi Reconstruction and Development Council. Kay left the firm last year.

-- Christopher "Ryan" Henry left the same company as a vice president in February to become deputy undersecretary of defense for policy.

-- Sullivan Haave Associates Incorporated was founded by Carol Haave, currently the deputy assistant secretary of defense for security and information operations.

-- Jack Sheehan, senior vice president in Bechtel's petroleum and chemicals business, served on the Defense Policy Board, which advises the defense secretary on a variety of issues.

"This has struck me as a noticeably uncurious administration when it comes to conflict-of-interest issues. I'm thinking of the Defense Policy Board, where one-third of the members had ties to companies with [$76 billion] in contracts," Lewis said, of the board.

The findings of the Center for Public Integrity are based, in part, on special requests made to the U.S. government for information on the contracts and an analysis of a federal contractor database.

The center said the Pentagon, State Department, and U.S. Agency for International Development refused to turn over much information or edited some of the contracts so that key figures were missing. It also said there was no single oversight body for the contracting process.

J. Edward Fox, an assistant administrator at the U.S. Agency for International Development, takes issue with the report.

"It incorrect to suggest that there is no overall oversight of this process," he wrote in a letter to the Center for Public Integrity. "The USAID inspector-general's review of all Iraq contracts which was requested by USAID Administrator Andrew S. Natsios on April 14 has shown that all Iraq contracts to date have been done 'in compliance' with federal regulations."