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California Firms Lining Up to Capitalize on Rebuilding of Iraq

Companies hope even small projects will put them on the path to oil-backed profits.

June 23, 2003|David Streitfeld | Times Staff Writer

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."

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