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Iraq: Locals Believe Contracting Process Biased Toward U.S. Firms

Businesses in Iraq say they feel closed out of the opportunities for rebuilding Iraq and the potential millions of dollars they could earn. They say they feel that most of the best contracts are going to U.S. companies or at least to Iraqi companies that the United States already knows.

Baghdad, 1 December 2003 (RFE/RL) -- Heydar Abdel Kazem, an Iraqi businessman, says he has been attending meetings for companies interested in taking part in Iraq's reconstruction every week for the past four months.

He says the meetings, held at Baghdad's Convention Center, are useless and that he's achieved nothing for his company. He says he knows who is to blame.

The meetings are organized by the U.S. engineering and construction giant, Kellogg, Brown & Root (KBR). KBR organizes the meetings so it can find Iraqi and non-Iraqi subcontractors to share in the work, estimated to be worth hundreds of millions of dollars.

But Kazem and people like him say the contracting procedures are flawed and unfair. He says local companies are increasingly frustrated that they are not being given more of a role in the reconstruction process. He tells RFE/RL he feels the contracts are being decided "behind closed doors" and that the contractual conditions are unreasonable.

"In colloquial in Iraq, we say they are done 'behind the doors.' You don't 'feel' the contracts. Even when it comes to the period of time they give you to apply for a contract -- they give you only four, five days. How are you going to prepare for it, how are you going to answer it, how are you going to get the answer to them? The period is unreasonable," Kazem said.

Hend Adnan works for an Iraqi engineering company. She says her firm has put in bids for some 10 contracts in the past four months and has never been selected for any project. She says in her opinion, U.S. officials routinely award contracts to the few Iraqi companies that they already know and trust, instead of giving new applicants a try.

"No, I don't like the process because [the U.S. authorities accept bids only] from a few companies all the time. You have [other] Iraqi companies, but all the time [the U.S. authorities contract only those Iraqi companies they already know]," Adnan said.

The U.S. is aware of the criticism, and "on the record" at least, they are very touchy when it comes to accusations of unfairness.

They say that part of the Iraqis' dissatisfaction is due to misperceptions. Since the reconstruction funds are awarded by the U.S. Congress, they are legally obliged to give preference to U.S. companies.

But they add that U.S. companies are encouraged -- not obligated -- to hire as many subcontractors as possible. In the case of the main U.S. agency for distributing reconstruction aid -- USAID -- its Bechtel and KBR subcontractors maintain they have allocated about 50 percent of their contracts to Iraqi companies and plan to increase that figure to 70 percent.

Concerning the complaint that the contract deadlines are too tight, U.S. officials say that is the nature of the fast turnaround work in Iraq. The U.S. companies have to operate under the same restraints.

Other Iraqis have even complained that in a few cases, U.S. officials have allowed firms reportedly associated with the former regime to make their way back into business circles and enrich themselves.

Entifadh Qanbar, spokesman for the Iraqi National Congress, an umbrella group for Iraqi opposition groups during Hussein's reign, says some of these companies have used powerful lobbying firms in the United States.

"A lot of the Iraqis who worked with the previous regime, because they have a lot of money and a lot of access, they were able to promote themselves in Washington, sometimes even before entering competition in Baghdad. That's how they were able to get some contracts," Qanbar said.

U.S. officials concede this may have happened. But they caution that just because some Iraqis accuse a company of ties to Iraq's former regime, that does not necessarily make it so.