Finalists for Rebuilding Down to 2 Firms

By David Streitfeld and Nancy Cleeland

April 3, 2003 12 AM PT

Times Staff Writers

SAN FRANCISCO —

The entrance to Bechtel Group Inc. headquarters here is defended by metal crowd barriers and protected by security guards. Even the adjoining plaza, an oasis for harried office workers in benign times, is off-limits.

Bechtel, the largest construction firm in the country and the best known, became a flashpoint for protesters in the first days of the Iraq war. Demonstrators accused privately held Bechtel, which was bidding to rebuild post-conflict Iraq, of war profiteering and worse. Dozens were arrested.

There has been no such rowdy behavior at the staid, 12-story Pasadena headquarters of Parsons Corp., another bidder. A relative pipsqueak in the world of global contracting, Parsons ranks 28th among U.S. contractors.

Parsons builds roads, airports and industrial parks. It destroys chemical weapons and creates mass transit systems. For the most part, the employee-owned company has avoided the intense criticism that has dogged Bechtel.

That could change in coming days.

Bechtel and Parsons have emerged as the two finalists in a highly publicized competition to repair Iraq’s roads, railways, schools, water system, airports and ports, sources close to the process say.

Whoever wins will take a leap in public recognition. For Parsons, that would mean leaving obscurity behind. For Bechtel, it probably would mean keeping the crowd barriers, just in case.

Despite the burdens of a higher profile, “I’m sure they both want the job,” said Janice Tuchman, editor in chief of the trade journal Engineering News-Record. “Companies of their stature look forward to a challenge.”

An announcement could come from the U.S. Agency for International Development as early as today. The contract is worth $600 million; that amount could grow significantly as additional reconstruction contracts are handed out.

Bechtel’s revenue in 2001, the last year for which it published figures, was $13.4 billion, with more than $10 billion coming from North America. New work booked -- a measure of future revenue -- fell sharply to $9.3 billion from $14.5 billion in 2000 and $23.3 billion in 1999.

Parsons, with 9,000 employees worldwide, had revenue of $2.4 billion last year. The future promises significant expansion: New contracts signed in 2001 were valued at $6.5 billion.

Parsons has teamed up with Kellogg, Brown and Root, unit of construction giant Halliburton, in bidding for this contract. Bechtel also would be likely to subcontract much of the work.

The San Francisco company traces its roots to the 1898 decision by Warren Bechtel, a struggling Kansas cattle farmer, to set off for Oklahoma in search of better prospects.

Bechtel spent some time working on a railroad and then took off, ending up in Reno. “I arrived,” he said, “with a wife, two babies, a slide trombone and a $10 bill.” He became an estimator for Southern Pacific, then a gravel pit superintendent.

Soon he was working for himself; after a big railroad project in Oregon in 1910, he told a friend that he had more money than he ever expected to have in his life.

Bechtel’s son Stephen put the company into the pipeline business in 1929, and took over after the founder’s death in 1933. “We’ll build anything for anybody, no matter what the location, type or size,” Stephen Bechtel said.

And they did. “If you look at which companies really built the postwar infrastructure around the world, Bechtel would be in the lead,” said Laton McCartney, who published a critical history on the firm in 1988.

Among its high-profile projects: Hoover Dam, the San Francisco-Oakland Bay Bridge, the English Channel tunnel and Boston’s so-called Big Dig, the largest and most complex highway project in U.S. history.

Parsons was founded in 1944 as a petrochemical engineering firm and has since expanded into a broad range of engineering and construction work, largely through acquisitions.

Its current projects range from a $569-million deal to renovate and design schools for the Memphis City School District to a 25-year effort, nearly finished, to create and build an entire industrial city for Saudi Arabia. The company, which was a key consultant on the Alameda Corridor rail project in Los Angeles, has a strong background in highways and airports, skills that will be in heavy demand in Iraq.

Winning the contract would not only be a feather in Parsons’ cap but would enlarge its presence in the Middle East, where it is firmly entrenched in Saudi Arabia and Kuwait. It also would accelerate the company’s growing involvement in the world of postwar rebuilding.

Parsons won three-year contracts to help rebuild Kosovo and Bosnia-Herzegovina. During a scouting trip to Bosnia in 1996, Parsons then-Chief Executive Leonard Pieroni was killed in an airplane accident along with Commerce Secretary Ronald Brown. He was succeeded by James McNulty.

Both companies have had their share of controversy.

The Boston Globe, in a recent series of stories, said $1.1 billion in cost overruns on the city’s Big Dig project “are tied to Bechtel mistakes.”

In the company’s 17 years running the project, the newspaper said, Bechtel “has neglected to perform basic work called for in its contracts, such as conducting crucial field surveys ... and verifying the locations of utility lines and buildings.”

Bechtel has called the stories “fundamentally flawed,” but Massachusetts Gov. Mitt Romney has ordered an investigation.

Parsons, for all its low-key ways, hasn’t been free of accusations either. Last year it was at the center of what a New Jersey investigating commission called a “mammoth boondoggle” that involved a seven-year contract to operate the state’s vehicle-inspection program.

The program was plagued by frozen equipment and cost overruns that added $200 million to the $400-million contract. Parsons, which had been a generous donor to then-Gov. Christine Whitman, had been the sole bidder on the contract.

Parsons defended its work and last year negotiated a two-year contract extension with Gov. James E. McGreevey.

Times staff writer Mark Fineman contributed to this report.

Rivals for repairs

Parsons Corp.

Based: Pasadena

Founded: 1944

Employees: More than 9,000

Offices: Operating in 46 states and 37 countries

Chairman & CEO: James McNulty

Major projects:

* Upgrading U.S. air-traffic control facilities after the 2001 terrorist attacks

* Redevelopment of Denver’s Stapleton Airport