Single Largest Reconstruction Program
For four years, construction and reconstruction work in Iraq and Afghanistan has been fitful at best. U.S. and allied efforts to upgrade infrastructure and public facilities in the two Middle Eastern countries have been frustrated by deadly extremists who have targeted both the projects and the people working on them.
Yet U.S. Army Corps of Engineers officials report that the work continues, even though media coverage of it is scant and the destructive attacks by insurgents and bandits have had a debilitating effect on overall progress. However, the character of the rebuilding work has evolved over the last couple of years. The role of U.S. companies clearly has changed and the scope of the work also has shifted in keeping with changing political structures in each nation.
For one thing, more and more contracts are being awarded to local contractors. That wasn't the case early on. In the months following the invasion of Afghanistan and Iraq after the terror strikes against the United States in 2001, the need in the two countries for heavy construction talent and resources quickly became evident, but the contracting help was not solicited inside the borders.
Both countries were a mess. Public services and most of the pavement, pipelines and power lines that supported them had been neglected to the point of ruin. Regimes in each country presided over collapsed economies and relied on quick fixes to provide momentary relief for their citizens, often scavenging less favored public systems to keep favored systems functioning.
Consequently, when the countries were opened to the outside world, the Army Corps of Engineers found electricity generating plants that were miserably under-performing or off line, pipelines for water and sewage that were broken or leaking, roads and bridges deteriorating, schools and hospitals crumbling.
To begin this massive infrastructure work - which has been called "the single largest reconstruction program in the history of the world" - U.S. and coalition forces looked first to international companies. "I was in Iraq in early late 2003 and early 2004," said Whit Scully, who works in a Washington, D.C., office of the U.S. Army Corps of Engineers, the office that augments Corps work in Iraq. "At that time, the people who set up the program management office for Iraq construction funds decided we needed large contracts with large international contractors. We went with these large firms because we had billions of dollars of work to do."
Consequently, early contracts went to the Halliburtons, Parsons and Bechtels of the U.S. construction industry, companies large enough to accommodate the sweep of work being undertaken. Yet even in those days, the American companies predominantly used Iraqi subcontractors.
An audit report just last month from the office of the Special Inspector General for Iraq Reconstruction noted this partnership with Iraqi nationals. The report lauded Bechtel on its handling of a $1.3 billion contract that included an electrical generation plant in Baghdad, a gas turbine at Kirkuk and rehabilitation of sewage lines and pump stations at Zafaranyah and Kadhamiya. Calling the company's work "exemplary and cost-effective," the report also observed that the company had employed several thousand Iraqi citizens and dozens of Iraqi subcontractors. To be specific, when the projects were at their busiest stages, the company had 40,000 Iraqis on its payroll.
Scully said the administrators handling contracts right after the major fighting ceased had little choice: They had to seek large contractors from outside the country. The bidding system was set up to pay for work only after it was completed. Most Iraqi firms simply were not capitalized enough to tackle a project of any size without being paid in advance. "The financial system in Iraq was in shambles. It would have been difficult to find Iraqi firms capable of taking on such work," he said. "Now we are dealing more and more directly with Iraqi companies that have the equipment and the experience to do the work."
It should be noted that the Army Corps of Engineers itself does not have any construction capability. In Iraq and Afghanistan, as in the United States, it oversees large-scale public projects, but contractors handle most project design and all actual dirt-moving, concrete-pouring and erection of steel. While some U.S. military branches do have construction units, in Iraq as elsewhere such units only take on relatively small-scale military projects.
Most of the construction and reconstruction work in Iraq and Afghanistan is directed by the Corps of Engineers under the auspices of such "customers" as the United States Agency for International Development (USAID), the U.S. Department of State, the Iraqi Relief and Reconstruction Fund (IRRF), the Commander's Emergency Response Program (CERP), the Development Fund for Iraq and other funding clients.
Corps engineers have been busy. In mid-July, the Corps reported that nearly 3,000 of 3,400 IRRF planned projects had been completed, as well as 6,600 of 7,800 smaller CERP projects. While the statistical story is impressive, the numbers don't tell the whole story. The Corps' periodically issued "Global War on Terror Reconstruction Report" contains accounts of individual projects. The July issue, for example, reported on eight new primary health care centers being turned over to the Iraqi government and noted that 870 mi. (1,400 km) of paved roadways will be constructed in Afghanistan in the 2007 fiscal year, twice what was built in the last two fiscal years combined.
The rule of thumb is that Corps engineers in Iraq have more than a thousand active projects in various stages of construction at any one time. "We've gone past the peak of construction work, but it still is at a very high level," Scully said. "On a scale of 10, we still have a significant amount of effort going on, probably at a 7 or 8 level, and won't get down to a 5 until next year."
In neighboring Afghanistan, the work of rebuilding the country attracted such American firms as the Louis Berger Group. The New Jersey firm launched into a variety of projects ranging from constructing schools in the southern provinces to building clinics near Kabul to paving 298 mi. (482 km) of the Kabul to Kandahar highway. The latter project was a flashback to the company's first job overseas in 1959, when it built 435 mi. (696 km) of highway between Rangoon and Mandalay in Burma.
Berger subcontracted the Kabul-to-Kandahar highway work to Turkish firms, partly because of logistics. In a 2003 speech, Berger vice-president Tom Nicastro talked about the difficulties encountered in building that roadway. "They [Turkish contractors] have brought into Afghanistan equipment and commodities, including bitumen for the road. They had to bring in everything but the aggregate. They have had to set up camps in desolate and sometimes unfriendly surroundings. Their camps have been attacked by Taliban and bandits. Yet they have learned and they have persevered."
Berger pledged to have the first phase of the highway project completed by the end of 2003 and the roadway was officially reopened Dec. 16 of that year. Nicastro was at the dedication ceremony and gave the kind of statistical report that is pretty typical for projects in the region: Asphalt laid 4 in. (10 cm) thick and 23 ft. (7 m) wide, 1,000 anti-tank and anti-personnel mines removed, six guards killed in a Taliban attack, one American and one Afghan engineer wounded in an ambush, cost per kilometer of highway - $600,000.
The Berger Group is still working in the region, as are several other large U.S. companies, but another big one, Bechtel, is gone. The San Francisco, Calif., firm pulled out after completing its contract last November. During three years of work, the corporation's engineers and on-site managers oversaw dredging of an Iraqi harbor, repair of sewage plants and electricity generating plants, the rebuilding and surfacing of airport runways and reconstruction of highway bridges, among other projects. But the company also saw 52 employees killed, an equal number wounded and several workers kidnapped. The company consequently ended up diverting contract money from reconstruction of public facilities to protection of its employees.
Cliff Mumm, Bechtel president for infrastructure, said in a San Francisco Chronicle newspaper interview at the time of the company's pullout that it was "heartbreaking" to have accomplished only what the company did instead of what it might have. "Had Iraq been a calmer place while we were there, amazing things could have been done," he said.
Mohammed Khudairi is well aware of the dangers in Iraq, but his company takes a longer view. Khudairi and his father, Aziz Khudairi, and brother, Subhi, are principal officers in the Khudairi Group, which was formed five years ago in Houston, Texas. The firm is deeply involved in the Iraq reconstruction effort and has no intentions of quitting.
After moving to the United States in the late 1980s, the family's return to Iraq in 2002 was something of a return to business as usual. The tumultuous Iraqi domestic situation was not all unfamiliar to them. Before the family moved to this country, Aziz Khudairi founded and owned several Iraqi manufacturing industries that company literature says "survived three major wars, 12 years of sanctions, runaway inflation, manpower shortages, bombings and power blackouts." Through it all, Khudairi proudly notes, the family and companies were "never politically ‘tainted' by the volatile politics of Iraq."
Aziz Khudairi has a degree in chemical engineering from Baghdad University and a masters in industrial engineering from Northeast University in Boston, Mass. The company he heads was formed to capitalize on the suddenly-open Iraqi society, a place of violent political upheaval from which some Khudairi family members never fled. The Khudairi Group primarily bids on relatively small infrastructure projects in water and power service sectors and has done such work across the country. "We work through project managers in satellite offices so we can localize our work efforts in north and south. You have to localize your work force," said Mohammed Khudairi, who is vice president of marketing and sales. "Some areas we don't work in - the hot spots - but we have a presence in most of the country."
He said their continued success in completing projects and earning subsequent contracts is dependent upon the company's ability to hire capable people in the areas where projects are undertaken. Such hiring requires company managers on job sites to be discriminating in their selection process. "We do the necessary vetting and we make sure the people hired are not affiliated with any terrorist organization or with the Baath Party," Mohammed Khudairi said. "We make sure our staff very thoroughly vets the applicants. Once they are cleared, we bring them on. We have guys who have worked with us on several projects and we can call upon them and trust them."
The Khudairi Group has another industry link to Iraq: It is the exclusive dealer in the country for John Deere construction equipment. Mohammed Khudairi said establishing the John Deere brand in Iraq has been "quite difficult. It has been tough for us on the heavy equipment side. It is a very competitive market."
Besides competing with other U.S. brands of equipment, the dealership vies with machinery imported from Kuwait, Dubai, Syria, Turkey and the Far East. Because of the current tumult surrounding Iraqi commerce, the company opted not to send a large inventory of machinery. But it has sold what it did take with the exception of some skid steer loaders, Mohammed Khudairi said. "The John Deere equipment dealership is a part of our business we hope to grow."
National media have widely covered the new "surge" military strategy in Iraq introduced by the Pentagon in recent months. It essentially involves more troops and more emphasis on holding on to pacified areas. Not as well publicized is the change in strategy that has occurred on the reconstruction front. It essentially involves contracting shorter-term, less monumental projects and handing over to Iraqi authorities and companies more responsibility for reconstruction.
The Iraq Relief and Reconstruction Fund has expended approximately 90 percent of its $13 billion in project money and the head of the Iraq Reconstruction Management Office said in March most of the major work is done. Some of the work has been for naught, with insurgents blowing up new power lines and bridges at the first opportunity, for example, but much of the new or upgraded infrastructure is intact. The new push is for the Iraqi government to maintain and build on what it has. "Sustainability" is the new buzz word. "It is a shift away from us building large things … to working to build their capacity to do things for themselves," Ambassador Joseph Saloom told the American Forces Press Service. "They [Iraqi leaders] seem to be able to spend money on salaries and so forth, but when it comes to actually channeling their resources to actually build things for the population, that is an area where they need our help."
The infrastructure maintenance problem is exacerbated by a slowness of the Iraqi government to take formal possession of newly constructed or rebuilt public facilities. A July report by the Inspector General for Iraq Reconstruction said the government has accepted approximately 435 of 2,800 completed projects that cost nearly $6 billion. The reluctance to assume responsibility for those facilities - which is blamed on Iraqi political rivalry - leaves the refurbished or new facilities vulnerable to deterioration through neglect, or to out-and-out willful destruction.
So news from Iraq and Afghanistan continues to be a mixed bag for the U.S. construction industry, with project opportunities and new markets jumbled together with political and violent reversals. Encouraging news - for example, that an historic bridge connecting Afghanistan and Tajikistan will be completed this month a year and a half after construction began - is tempered by reports of bid-rigging and fraudulent work.
Whit Scully, who works in the Corps office in Washington, said more has been accomplished than generally is credited in national media reports. He cites the stories often retold about Baghdad having less electricity than it did when Saddam Hussein still ran the country. That is "misleading," Scully said. "Before the war, the two-thirds of people who lived outside Baghdad had significantly less electricity than people in Baghdad," he said. "Now the push is to spread the wealth. Consequently, that same two-thirds of the population has much more electricity today. Also, if you fly over Baghdad in the daytime, you'll see satellite dishes on about every building. You see air conditioning and cell phones and TVs - which means the demand for electricity has gone up, too. It is very misleading to say we haven't done our job," Scully said of the reconstruction effort.
In a San Francisco Chronicle interview last November with Cliff Mumm, Bechtel's president for infrastructure, the executive said he believed the company's work in Iraq was not without lasting value. Most of the projects will endure, he said, and so will the good relationships with Iraqis fostered in the course of the work. "Those people will be there and I think they'll think favorably of us," he told the Chronicle, which could lead to future partnerships on projects in Iraq.
Scully said he believes a few new contracts are available for U.S. firms to bid on now and is hoping Iraqi government contracts will be open to American contractors, too. "The Iraqis have funds," he said. "What we are hoping for is when they break loose and figure out how to manage all those resources, they will advertise for any and all firms to go work there, including American firms." For now, many of the small Corps-managed contracts being competitively bid are open only to Iraqi contractors. "After all," he said, "we are trying to help them build their economy."
The Khudairi family is upbeat about the future of Iraq as a developing major economy and market for foreign contractors. Certainly, the Khudairi Group plans to be involved, Mohammed Khudairi said. He said the family company "considers itself an Iraqi firm with a Houston support headquarters" and plans to build up its presence in the Iraqi economy, little by little, by focusing on "niche markets." "We think that business stability in Iraq will come with economic development and political stability," he said. "We are a long-term player. As Iraqi-Americans, we have a reputation to uphold. Some companies go in, make a lot of money and leave, but that is not how we are conducting our business there."
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