California Firms Lining Up to Capitalize on Rebuilding of Iraq
If Iraq is to join the 21st century, it will have to employ modern trash disposal techniques. Ceres Associates, a Bay Area waste management firm, is standing by to set up landfills.
Iraq’s sole seaport is so antiquated it can barely function. Crowley Maritime Corp., an Oakland company, is offering up the services of one of the world’s largest tugboat fleets.
There’s so much to be done in the impoverished, war-torn and looter-despoiled country. To start doing it, L.A. Construction & Manpower Suppliers in Reseda is ready to supply skilled, English-speaking workers from India.
The corporate gold rush to Iraq has begun.
“Companies see a huge pie in Iraq, one with a special flavor they like: oil,” said Mark Baxter, director of the Maguire Energy Institute at Southern Methodist University in Dallas. Iraq’s oil reserves, the second-largest in the world, make it much more enticing than many other needy countries.
“Oil is the commodity that ensures the companies will be paid,” Baxter said.
At least for the moment, many firms see their path to profit through Bechtel Group Inc. Two months ago, Bechtel won the U.S. government’s largest Iraqi reconstruction contract: $680 million to be spent over 18 months.
The San Francisco firm, the biggest engineering and construction company in the country, intends to do only a small slice of the work itself. The rest of the time it will act as supervisor for dozens, if not hundreds, of other outfits, which will be assigned tasks both large (dredging that deep-water harbor) and small (providing a master mechanic for the port).
In the face of wildfire enthusiasm, Bechtel is doing its best to be a wet blanket. It is warning potential subcontractors that the work could be difficult and dangerous and not particularly remunerative. Bechtel already has awarded 21 subcontracts, many for emergency work around the Umm al Qasr port. Most were for less than $500,000 -- the corporate equivalent of peanuts.
Hardly anyone seems dissuaded.
“The level of interest from potential subcontractors is unprecedented,” said Bechtel spokeswoman Valerie Kazanjian. “It’s not normal.”
About the same time that Bechtel was getting the Iraqi contract from the U.S. Agency for International Development, it began soliciting subcontractors for what is on its face a much larger project, the $1.5-billion decommissioning of an Army chemical weapons stockpile in Colorado.
The Colorado project has drawn 339 potential subcontractors. Iraq has attracted more than 20 times as many supplicants: 7,241 companies have registered with Bechtel.
Iraqi Firms in the Mix
Another way Bechtel is trying to damp expectations is by saying it will give as much work as possible to Iraqi companies. This month, Al Ebadi Group of Baghdad won a Bechtel contract to provide labor and equipment at the Umm al Qasr port.
Many potential subcontractors are hearing these cautionary notes at a series of Bechtel roadshows. In Washington, London and Kuwait, thousands of would-be contractors showed up.
Although the number of subcontractors chosen will be small, the conferences at least allow Bechtel to show it is being open and transparent in its search.
Companies from 89 countries have registered in numbers that broadly reflect the coalition that fought the war. Fifty-six percent of the companies are American; 9% are British. One hundred sixty companies registered from Spain, which supported the war, and only 16 did so from France, which opposed it.
On Wednesday, Bechtel took the show to Iraq. Hundreds of hopeful businesspeople went to the Baghdad convention center, where they were reassured that they were in line for much of the reconstruction work -- provided that certain requirements could be met.
A number of the Iraqis said they weren’t sure they could compete against foreign firms, Reuters news service reported. The Iraqis said they were worried that inferior raw materials and a dozen years of U.N. sanctions had seriously weakened their ability to meet U.S. quality and safety standards.
For some hungry corporations, there are routes to Iraq beyond Bechtel.
Stevedoring Services of America won a $4.8-million government contract to manage the Umm al Qasr port in early April. Since then, the Seattle firm has received more than 500 requests, appeals or demands for a piece of the action.
“We were surprised,” said Stevedoring Services communications manager Laurel Hart. “We’re an industry that is fairly behind the scenes.”
Sizable Stakes
What’s at stake goes far beyond those initial contracts.
“We know Bechtel is there just to put a Band-Aid on problems,” said Nicholas Patz, president of Ceres Associates, the waste management outfit. “Our big thing is to get a foothold and then be there when there’s some real reconstruction. We could fix the garbage problems in the whole country for a reasonable amount, and everyone would be happy, especially us.”
Ceres, which has offices in Torrance and Benicia, Calif., employs about 60 people. Its biggest project is in the United Arab Emirates, where it built and is running a $6-million landfill. Iraq, just a short trip up the Persian Gulf, is a logical next step.
“We’re looking for someplace to make a reasonable profit and provide for our retirement,” Patz said.
But he has no idea whether he will get his foothold. Before the U.S. government chose Bechtel, it outlined in a public document what the prime contractor was expected to do. There were references to waste management, but it’s unclear where garbage will rank as a priority against roads, schools and power plants.
“This is a total grope in the dark,” Patz said.
If Bechtel got the go-ahead from the U.S. government to, say, set up a landfill, then it would ask Ceres and any other registered waste management companies to submit a best-and-final offer for the work. A decision would swiftly follow, Bechtel said. All the subcontracts are expected to be awarded by the end of the summer.
Many companies don’t want to wait that long. P&O; Nedlloyd Logistics, a London-based warehousing and shipping firm, registered with Bechtel but also is scouting independently from its office in Dubai.
“From what I read in the newspapers, it looks like we’ll be in Iraq for a while,” said Mario Lopez, P&O;’s New Jersey-based manager of business development.
That’s increasing his interest. It makes sense, Lopez said, “to invest more time in something that’s going to be ongoing.”
A third group is keeping enthusiasm in check.
“Everyone thinks there’s a bowlful of money out there waiting for them,” said Edward Fortunato, vice president for government business development for Crowley Maritime. “But as you peel away the onion, there may not be as much as you think.”
By the time the subcontracting process is complete, Bechtel expects to register 10,000 firms, adding to its already formidable list of 60,000 global contacts.
Shift in Fortunes
If the war had happened five years ago, during the boom, that new total might have been much lower.
“Companies would have said, ‘Why bother?’ This reflects the shift in corporate fortunes,” said Jack Kyser, chief economist of the Los Angeles County Economic Development Corp.
Part of the legend of the 1849 California gold rush is that the biggest fortunes were made not by the prospectors but by those who sold the picks, shovels and other supplies.
In the same way, entrepreneurs are hoping to profit this time around by offering their services as middlemen.
Equity International, a Washington organization that runs conferences on reconstruction and development projects, held a daylong seminar on Iraq in early May. Attendees paid $495 (if they worked for corporations) or $245 (if they worked for nonprofits) to hear how “the opportunities for businesses in the U.S. are endless.”
Four hundred people were expected; 650 showed up.
“The interest in Iraq is greater than what we saw in Bosnia, Kosovo, Croatia, Turkey after the earthquakes, Venezuela after the flood, Central America after Hurricane Mitch and Afghanistan last year,” said William Loiry, president of Equity International. “This is bigger than all of those put together.”
He is holding another conference, in early July. This time he has booked a larger hall.
“There are so few other significant opportunities out there, people are scrambling to make sure they’re part of this one,” Loiry said.
And if not this one, then the next one.
“Even if they don’t get an award, they’ll be on the radar screen. They may be called in the future,” Loiry said. “Unfortunately, there’s always going to be a need for reconstruction.”
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Going for the gold
More than 7,200 companies have registered with Bechtel Group to offer their services in rebuilding Iraq. The top 22 countries, by number of companies:
*--* Number of % of Country companies all cos United States 4,075 56% Britain 637 9 Turkey 210 3 India 175 2 Kuwait 170 2 Italy 166 2 Spain 160 2 Saudi Arabia 152 2 Australia 128 2 Canada 117 2 Poland 83 1 Netherlands 63 1 Denmark 62 1 Czech Republic 58 1 Germany 57 1 Jordan 56 1 Portugal 55 1 South Korea 54 1 Egypt 49 1 Singapore 44 1 Lebanon 43 1 United Arab Emirates 39 1
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Source: Bechtel Group
