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Last Updated: Tuesday, 21 October, 2003, 08:48 GMT 09:48 UK
The challenge of rebuilding Iraq

By Steve Schifferes
BBC News Online economics reporter

How far has the task of rebuilding Iraq succeeded in the six months since US army swept Saddam Hussein from power? As the world's leaders gather in Madrid this week to pledge money for Iraq's reconstruction, BBC News Online looks at the progress so far.

If anyone should know about the situation on the ground, it should be Cliff Mumm, project director for Iraq for Bechtel - the huge American construction company awarded the main $1bn contract to rebuild Iraq's infrastructure by the US Government.

Mr Mumm, speaking from his office in Baghdad, told BBC News Online that everyone under-estimated the scale of the problem.

"There were huge expectations...but people didn't really understand the scale of the task.

You can't get rich on government contracts
Cliff Mumm, Bechtel project director for Iraq
"It had been impossible to do a truly unbiased engineering report under the previous regime.

"Iraq had 40 years of under-investment in its infrastructure...under Saddam Hussein, managers were put in jail if power plants broke down.

"It was as if someone was trying to run a car built in the l950s at 100 miles [160km] per hour.

"As soon as the pressure was lifted, the inevitable happened, and plants started to break down."

Political revenge

He adds that looting and political revenge, which led to the stripping of the high-voltage power grid connecting Baghdad to Basra for its copper wire, contributed to the problem.

If people are working, they're not shooting at us
Andrew Natsios, USAID
But Mr Mumm says the situation is improving, with the power supply now back to the pre-war levels.

However, he points out that under Saddam Hussein, the grid supplied Baghdad with nearly continuous power at the expense of the rest of the country.

Now Basra has a nearly 24-hour power supply, while Baghdad runs on three hours on, three hours off.

The IGC is situated within the CPA's ring of steel and concrete known as the Green Zone
Security is still tight in Baghdad
And he thinks it will take at least another year of investment before there is an adequate power supply for the whole country.

But he hopes to have the fixed-line Baghdad telephone system up and running by the end of the year.

Mr Mumm said he found the work challenging - but he was less worried about it than his last big project for Bechtel, when he was drafted in to make sure the London underground's Jubilee Line extension was ready for the opening of the Millennium Dome on 1 January 2000.

Costs spiral

Bechtel's first task was to complete an assessment of Iraq's needs, and then to work out the urgent short-term priorities - which took them much of their critical first few months in the country.

BECHTEL RECONSTRUCTION PROJECTS
Power: rebuilding Daura, Bayji power plants, restoring 400KW transmission lines
Water and sewage: repair Baghdad sewage system, Sweet Water Canal
Telecoms: restoring Baghdad system and national fibre-optic backbone
Ports: opened Umm Qasr to deep water shipping
Airports: restored Baghdad and Basra international airports
Buildings: rebuilt 1239 schools, health clinics, fire stations
source: Bechtel
It soon became clear that the initial $680m contract from the US Government - recently increased to $1bn - was going to be just a small down-payment.

Bechtel estimates the cost of bringing the power system alone up to Middle East standards at $15bn - higher than the UN estimate of $12bn.

It says there are also major needs in water supply - where untreated sewage from Baghdad enters the Tigris river and ends up in Basra.

It also says there is little point in building many more power generation plants straight away.

The lack of oil refining capacity and transport infrastructure meant the diesel oil needed to power the plants would not be delivered.

But Mr Mumm is optimistic about the long-term future of Iraq, "sitting in the fertile crescent on a sea of oil", and he says Bechtel is committed to the country for the long-term, even after its initial contract expires in 2004.

Security worries

Like everyone else in Iraq, security is the biggest problem facing Bechtel in its efforts to rebuild the economy. Mr Mumm said the company was initially told that travel in Iraq would be "permissive" with no restrictions - but soon learned things were different on the ground.

The Bechtel staff live in temporary trailers in camps surrounded by barbed wire, and only travel in armed convoy of at least two vehicles with a "shooter" in every car.

The night before we spoke, one of their sites had been attacked by a rocket-propelled grenade.

Unlike other contractors, Bechtel uses a UK-based private security service, with over 100 ex-military personnel - rather than the US army - for protection.

It is the biggest single contract won by a British firm.

When possible, Bechtel personnel fly in military helicopters rather than drive across the country.

The company is also increasingly employing Iraqi nationals in key positions, who can travel more freely than US citizens.

Employing locals

Mr Mumm said it was not just security that was driving the company to employ as many Iraqis as possible as local contractors.

BECHTEL'S HISTORY
Founded in San Francisco in 1898
Built Hoover Dam in Arizona in 1930s
20,000 projects in 140 countries over 100 years
47,000 employees
$11.6bn in global revenues
Built San Francisco's Bay Area Rapid Transit System, Boston's 'Big Dig' central artery/tunnel
Managed UK's Jubilee Line Extension, West Coast Main Line Upgrade
Built Saudi Arabia's Jubail Petrochemical Complex,
Trans-Arabian Pipeline
They were also hoping to help tackle the unrest caused by growing unemployment.

It is a goal endorsed by Bechtel's employer, the US government agency USAID.

"If people are working, they're not shooting at us," USAID's chief Andrew Natsios, told Congress earlier this month.

"So maximising Iraqi business participation will increase the security of the country, and keep people off the streets, particularly young men who in any society increase the level of instability where there is high unemployment," he added.

At its peak this summer, Bechtel employed 30,000 Iraqis to rebuild 1,300 local schools in time for the new school year.

It now employs between 5,000 and 10,000 Iraqis, whom Mr Mumm says are "good workers who understand quality".

Bechtel has a long history in Iraq and some of its new recruits also worked for it before the first Gulf War.

Bechtel has handed out 70% of its subcontracts to Iraq firms, although Mr Mumm says there is a lot of "complaining" among the 2,000 firms who unsuccessfully bid for contracts.

He says the process of bidding is open, with the only people excluded being those with close links to the previous regime or former state-owned companies.

In general, the only jobs that are tendered to non-Iraqi firms are security, and specialist tasks like dredging the harbour or running the air traffic control system.

There is bound to be disappointment, with only 110 firms selected so far, and perhaps 200 eventually to be used, he adds.

But he points out that $600m is not a large contract in civil engineering terms - only the size of a large power plant or refinery.

Cronyism

Bechtel has come in for some criticism for the way it received the original contract from the US Government, and its profit margins.

But Mr Mumm defended the company, saying that "you can't get rich on government contracts" that operate on a fixed fee.

He says the profit margin is only "5% to 7%", or around $30m-$40m on their initial contract of $680m, and their $80m fee covers their whole project management costs, including personnel and living expenses.

Bechtel has also denied claims that it used cronyism - former Defence Secretary Casper Weinberger and former Secretary of State George Schultz are among its present or former board members - in getting its contract.

Mr Mumm said he was more concerned about the need to get to grips with Iraq's emerging democratic institutions.

It was "more difficult for us but a healthy change" that Iraqi ministers were now in charge of programmes, he said, and would "negotiate, argue and discuss" with Bechtel over priorities.

"Otherwise we will be stuck here forever," he said.


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