Contractors’ Risks, Costs High in Iraq

For the businessmen who flocked to a government conference this month to learn how they might bid on Iraq contracts, the word from some who had been on the ground was sobering.

A hush fell over the crowd when a Halliburton Co. official showed a slide of a dented silver belt buckle. The buckle, he said, had saved a company truck driver’s life by deflecting a bullet during one of the more than 130 insurgent attacks on Halliburton workers.

Timothy B. Mills, a former Pentagon lawyer, deepened the gloom when he told how a Baghdad hotel clerk’s decision to give him a room in the back of the Palestine Hotel, instead of the room with a view in the front, saved his life in a rocket attack.

“This is part and parcel of doing business in Iraq,” Mills, now with the firm Patton Boggs, warned the group.

For businessmen here and abroad, the good news is that the U.S. government is planning to pour more than $18 billion into rebuilding Iraq’s antiquated and battered infrastructure. The bad news is that the influx of money is expected to make Iraq more dangerous.

U.S. and corporate officials fear that the thousands of additional workers expected to fan out across Iraq in the coming months to build utilities, ministries, schools and hospitals will prove irresistible targets for insurgents. As it puts the finishing touches on the bidding process, the Pentagon worries that the high security costs and high risks will scare off small firms and entrepreneurs and slow the reconstruction effort.

Until now, most of the estimated 12,000 contract employees in Iraq have been concentrated in a few areas and mostly shielded by U.S. troops, barbed wire and concrete barriers. In the months ahead, as their numbers multiply, private contractors will move into remote areas far from military protection.

“Everybody’s worried about this security issue,” said Robert Fardi, vice president of Amira Group, which is expanding its business in Iraq but struggling with partners who are unwilling to enter the country. “There are still lots of people who want to take the risk. But it’s frightening, absolutely frightening.”

In the immediate aftermath of the U.S.-led invasion in March, insurgents did not have contractors at the top of their hit list. But that changed as rebels sought less-protected targets and tried to hobble the coalition by striking groups that work with the military.

In hundreds of attacks on contract employees, several dozen personnel have been killed or wounded, U.S. officials and contractors estimate. They can offer no breakdown on how many of those casualties resulted in deaths and how many were injuries, and caution that the figures are imprecise because they rely on voluntary reports from contractors.

San Diego’s Titan Corp., which provides thousands of translators to the military in Iraq, has lost 13 employees in attacks since July. A company spokesman did not return repeated phone calls from The Times for comment on the deaths.

Halliburton subsidiary KBR, formerly Kellogg, Brown & Root, said two of its employees and six subcontract employees have been killed and four subcontract workers are classified as “missing.”

The potential damage to reconstruction efforts was illustrated this month when 60 workers for a South Korean electrical company pulled out after two colleagues were killed in an ambush. Their departure delayed work on the country’s electrical grid, one of the occupation authority’s highest priority missions.

The U.S. Agency for International Development last month began discussing how to shift some back-office contract workers to neighboring countries for greater safety, Jack Wheelock, head of the agency’s Iraq infrastructure project, said at a recent Pentagon conference.

Authorities also are urging newly arriving contractors to fortify themselves in expensive, heavily armed base camps with secure communications and supply “life lines” to ensure that they can summon help if they come under attack.

Pentagon officials recommend that contractors be guarded around the clock, encircled with multiple lines of defense and shielded by 10-foot concrete blast barriers, sometimes called “Bremer walls” after the coalition’s American administrator, L. Paul Bremer III.

The sites, Pentagon officials say, should be separated from roads by a 50-foot safety perimeter to protect against suicide bomb attacks. Inside the perimeter, they recommend constructing concentric defense lines, so contractors can repel attackers who clear away barriers with one vehicle, then send in a second to penetrate the site.

Attorney Mills, who works with several companies doing business in Iraq, says that there are about 100 such camps in Iraq but that the number could grow to as many as 500 when the new work is fully underway.

Despite such protections, insurgents can lob mortar shells into these modern Ft. Apaches or pick off individual workers in sniper attacks.

One U.S. contractor, who spoke on condition of anonymity, said his company realized belatedly that it was a mistake to allow employees to go outside during lunchtime to use the bathroom. A sniper invariably rained fire on the camp during the bathroom breaks.

Once outside fortified bases, contractors face tough protection choices on the roads, where most attacks occur.

A large sport utility vehicle, with its bulk, wide field of vision and off-road capability, is the usual choice of Western contractors in Iraq. But insurgents can easily identify them; they often drive up next to the behemoths and open fire.

“Any time you see two Suburbans driving down the road, it’s pretty unlikely it’s an Iraqi family going out to ... dinner after Ramadan,” Air Force Capt. Sam Dickson said at a Pentagon business conference last month. “It’s almost always coalition forces.”

One contractor said, “If you’re in a black Suburban, you might as well hang a sign, ‘Shoot me.’ ”

Some contractors shun armored vehicles, bodyguards and body armor. Instead, they try to avoid attention by driving battered sedans like those that are common among Iraqis, dressed in casual Western clothes that Iraqis might wear. Some male contractors have grown beards and mustaches favored by Iraqi men. Some female contractors, when traveling the roads, have taken to wearing the head scarves commonly worn by Iraqi women.

In any case, authorities strongly recommend wearing goggles to shield eyes from flying glass if the windshield and windows are shattered by roadside bombs, which are the most frequent means of attack.

Contractors also face tough choices when they hire armed security teams, which are now a must. They can choose former U.S. or British troops, at perhaps $1,000 a day, or Iraqi guards at perhaps one-tenth that price.

The Iraqi guards can be valuable, especially if they’re from an important local tribe and represent the protection of its leader. But their loyalty and diligence is often questionable, and they may even carry off some of the equipment they’re hired to protect, military officials say.

“Who are they really loyal to? Is it possible that they’ve been contacted by ... the resistance movement? Could they possibly be turned to be used against you at a later point? Absolutely,” Dickson said.

Another issue is “friendly fire.” U.S. troops have sometimes fired on contractor security personnel at remote sites, mistaking them for marauders, contractors say. Some contractors have their employees wear identifiable clothing, such as colored baseball caps. And coalition authorities are setting up a communications procedure so contractors can let a central authority know where they are at all times.

U.S. officials have acknowledged that these precautions are going to be a major part of the cost of reconstruction and have told contractors they can build them into their bids. Wheelock, of USAID, estimated that protection forces could add as much as 8% to contracts, and the cost of secure bases as much as 6%.

But some experts believe the figures will be much higher. James Jatras, an attorney in Washington who has been advising Iraqi ministry officials and businessmen, said he believes security costs could in some cases total 25% of a contract’s value.

For the biggest contractors, such as Halliburton and Bechtel, which have huge financial resources and long experience in dangerous areas, the costs are bearable. That may not be the case for smaller, less-experienced businesses.

Wheelock said some contract personnel “are getting pressure from their families to come home. They may decide it’s not worth it.” He said that hasn’t been much of a problem for his agency, “but it has been for some companies.”

Some countries eager to take part in the lucrative reconstruction have been hurt by the reluctance of their companies to send representatives to Baghdad in the current environment. The Japanese, South Koreans and Poles fall into that category, businesspeople there say.

Even some businesspeople from neighboring countries, such as Turkey and Kuwait, have become reluctant, especially as they have seen the United Nations and nongovernmental organizations reduce their presence because of the risks, businesspeople say.

Fardi, of Amira Group, said some of his company’s Kuwaiti partners are reluctant to enter even the relatively safe southern region of Iraq.

“They’re Arabs, they can blend in,” he said. “And still they’re scared.”

Security concerns recently forced Amira to cancel an international business conference scheduled for the spring in Iraq, Fardi said.

U.S. officials and business executives such as Fardi stress that many companies still are eager to take part -- as demonstrated by the standing-room-only crowds that attend reconstruction conferences.

Even so, businesspeople say many companies’ fear of taking part may cause serious damage to the reconstruction effort. The U.S.-led coalition is in a race to get as much rebuilt as possible as Iraqis increasingly turn against the occupation.

“When you think of the costs, the risks, the headaches, it’s a lot to ask of a company,” said a senior executive of one important contracting concern, who spoke on condition of anonymity because of a company policy against discussing security. “For a lot of companies, it’s clearly going to be too much.”