VOL. XLVI

No 47

24-November-2003
 

IRAQ
 

US Fast-Tracks Iraq Infrastructure Contracts Worth $18.7Bn

MEES Contributing Editor Diane Munro reports from Washington.

Washington has formally unveiled its 2004 infrastructure reconstruction program for Iraq, promising transparency in the bidding process and opening competition to its coalition partners and Iraqi companies. A major overhaul in the chain of command for management of US-funded projects is also now in place with the establishment of the Coalition Provisional Authority’s (CPA) new Iraq Program Management Office (PMO). The creation of the new office partly reflects the need to have a more structured and experienced team coordinate and streamline the massive and complex contracts, officials said. USAID, the US Army Corps of Engineers and various sectors of the Department of Defense have handled the award process to date. Under the new organizational structure, all these groups will now come under the umbrella of the PMO. In addition, with a fresh eye towards the hand over to Iraqi leadership next summer, the PMO is expected to coordinate and fully engage with the various Iraqi ministries in the project process.

Damage Control

The new management approach for post-war reconstruction projects is reportedly part of the new Iraq Stabilization Program headed by National Security Advisor Condoleezza Rice. The White House has charged the National Security Agency (NSA) with coordinating and accelerating US reconstruction efforts in Iraq. The NSA appears to be keeping a very low profile for now following the very public spat between Defense Secretary Donald Rumsfeld and NSA chief Rice over a leaked memo for the plan. Nonetheless, observers believe the organizational shake-up will speed up the momentum for the projects and help restore a level of credibility to US project management in Iraq. 

Charges of cronyism and mismanagement have dogged US reconstruction efforts from the start and it is hoped that the PMO will exercise much closer oversight on how the estimated $18.7bn contracts are granted and managed. Following the contentious battle between President Bush and the US Congress over funding levels for Iraq earlier this month, the supplemental spending bill also included the appointment of an inspector general to oversee the accounts and provide regular reports to the congressional appropriations committees.

Ret. Rear Admiral David Nash, new head of the PMO, told delegates at an “Industry Day” seminar on Iraq in Washington last week that his office would provide “maximum transparency from beginning to end”. Mr Nash comes to the post after spending five years as a senior vice-president of construction conglomerate Parsons Brinckerhoff following his retirement from the Navy. He will report to Iraq’s civilian administrator Paul Bremer.

Devil In The Detail

Mr Nash and his team have set an ambitious timeline to award 24 prime contracts by the beginning of February. However, many conference delegates questioned the feasibility of meeting the tight deadlines, especially since many of the project and contract details have not been determined, while many other guidelines need to be clarified. Mr Nash cautioned that they were still working on fleshing out the contract requirements, project priorities and a number of other critical issues but added that they hoped to have their plans finalized by the end of November and final RFPs posted in the first week of December.  That said, not only are there practical details that need to be determined, but there are several high-level political issues that need to be addressed. While bidding for the prime contracts is now open to Iraqi and coalition partners, officials say they do not yet know whether contracts will be available only to countries that provided troops, such as Britain, Australia and Poland, or if all of the 49 nations in the US-led coalition that provided various levels of support will be eligible. Many other countries will have an opportunity to participate in a subcontracting capacity but, here again, Washington is expected to have a say in who will be barred from the process.

In addition, some countries may not be eligible for contracts, depending on the guidelines and legal requirements of each agency issuing the final award. While the PMO will review proposals and manage the contracts onsite in Iraq, USAID, USACE, the Treasury, State and Defense Departments will still be the official agencies issuing the final contract awards from Washington. As such, each organization has differing regulations and legal constraints that must be followed.

Iraq Program Management Office Timeline

Perhaps the biggest obstacle in meeting the PMO’s aggressive deadlines is the escalating security problem in Iraq. Despite the well-documented project delays and cost overruns due to security issues with existing contractors, PMO is still requiring contractors to supply their own security forces. Without considerable support on the security front, potential subcontractors fear the exorbitant cost of supplying their own security essentially eliminates them from the bidding process. PMO officials, however, said they welcomed the feedback from the companies and plan to clarify and answer many of the questions on the web site http://rebuilding-iraq.net/pls/portal/ in the coming days.

Hired Management Guns

While many details clearly still need to be thrashed out, the PMO outlined a broad blueprint for project contracts at the conference. Mr Nash said six of the 24 prime contracts are designated for program management for each of the six industry sectors identified for funding. A seventh program management contract will be awarded to oversee PMO’s operations in Baghdad and Washington. The appointment of commercial program managers is critical given the sheer magnitude of the new infrastructure projects, he explained. Program managers will oversee everything from the contractual obligations to control costs to logistical bottlenecks, he said. The PMO identified 17 prime contracts covering six sectors: electricity; oil; water/public works; transportation and communications; security and justice; and buildings/housing/health. As many as 2,000 subcontracts may be needed within the scope of the prime contracts.

The electricity sector is by far the largest and most complex project, with six prime contracts valued at a total $5.55bn set to be awarded. Gary Foster, PMO Deputy Program Manager, said the organization will be soliciting two contracts for new power generation plants, one contract for the rehabilitation of power infrastructure and three contracts for work on transmission lines, distribution networks and communications. He said he expects the six prime contractors to award anywhere between 50-100 subcontracts.

Program Management Contracts

(Mn$)