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Coalition Cancels Iraq Contract

The $327-million deal for military equipment had gone to a fledgling U.S. firm. Its president has ties to an official on the Governing Council.

March 06, 2004|T. Christian Miller | Times Staff Writer

WASHINGTON — Acknowledging "irregularities" in its contracting process, the U.S.-led occupation authority in Iraq on Friday canceled a $327-million deal to equip the Iraqi army. The contract had been awarded to a fledgling Virginia company with limited military supply experience.

The U.S.-led Coalition Provisional Authority, which had previously suspended the deal with Nour USA, decided to toss out the contract. The authority will start from scratch in its effort to equip 40,000 Iraqi soldiers to eventually replace U.S. troops, possibly delaying the project by weeks.

The controversial contract was called into question after protests by several bidders who alleged that Nour could not deliver on its promises, and reports by the Los Angeles Times that cast doubt on Nour's claims about its partners and advisors.

The recognition that mistakes were made on one of the largest and most high-profile contracts awarded to date by coalition officials also raised questions about the authority's ability to manage the contracting process only weeks before the scheduled award of an additional $10 billion in contracts to rebuild Iraq's infrastructure.

Speaking to reporters Friday, a senior U.S. Army official described an office in Baghdad that is overwhelmed by the task of sifting through complex bid proposals. The official said the office had a staff of only five people, who were issuing as many as 15 contracts a day.

The official said the Army was reassessing the coalition authority's ability to award major contracts, though no other irregularities had been found.

"We frankly found some procedural irregularities in the contract filing and we are terminating" the contract, the Army official said. He said questions about Nour's ability to fulfill the contract played no role in the decision.

A Nour official said the company had not been notified of the decision and could not comment. The company's president is A. Huda Farouki, a Washington financier who is a friend of Ahmad Chalabi, the head of the Iraqi National Congress and a longtime Pentagon ally.

In all, five U.S., Polish and Jordanian companies protested the bid award to Nour.

Three of the companies -- Poland's state-owned military firm, Bumar Group; a U.S.-Jordanian consortium called Cemex Global; and a Georgia-based firm known as Poseco DST -- complained that sections of their proposals were ignored.

Some companies also said that Nour's $327-million winning bid was a low-ball offer and that it would be unable to deliver the jeeps, weapons and other items listed in the contract.

There were also questions about the company's proposal to have an international consortium supply the contract. The Polish government, whose firm's bid was $200 million higher than Nour's, launched an investigation into a Polish arms company that Nour had listed as a partner in its proposal. The investigation found that the company, Ostrowski Arms, had no license to export weapons.

Several other companies and retired high-ranking military officials that Nour listed as part of its team denied their participation when contacted by The Times.

On Friday, the U.S. Army official acknowledged that the coalition authority had failed to verify the members of Nour's consortium and also that it had not verified the participation of the officers, who were listed as belonging to an advisory board. The officers said they had never met nor done any work.

Such checks are not routinely done, and the lack of participation of the officials or companies "did not play a part in the decision to terminate" the contract, the senior official said.

Instead, the Army official said the occupation authority was to blame for writing a vague solicitation and failing to consider all the information that companies had submitted with their proposals.

The solicitation for the contract, issued last fall, contained unspecified "ambiguities" that led to confusion among the 17 companies that bid for the work, the official said.

As evidence, the Army official pointed to an enormous range in the bids, from Nour's $327 million to more than $1 billion from another bidder.

"That indicates that the companies were reading the requirements differently," the official said.

The official also said mistakes were made in the evaluation of the bids, though he did not specify them.

Given the mistakes, he said, a decision was made to reopen the solicitation for full competition, and place the contracting responsibility under the U.S. Army instead of the occupation authority.

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