US contractors set to lose out in Iraq reconstruction

US administration plans to cut costs and shift its remaining funds to Iraqi contractors

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By  Sean Cronin Published  April 16, 2005

More than US $800 million is to be axed from the reconstruction programme in Iraq as US construction companies are forced to take a back seat in rebuilding the country. It follows the publication of a report from the State Department, which is heavily critical of the decision to rely on US construction companies. Now the US administration plans to cancel several planned infrastructure projects and shift remaining funds toward Iraqi firms. One contractor working in Iraq said: “This tells us what we already know — that the presence of US contractors on the ground is adding to the security problems in the country. The funding adjustment is the third to be made in the last nine months and reflects the increasing desperation of the US government to contain spiraling costs created by the security situation. The decision to shift funds towards Iraqi firms may partly explain the tiny presence of US companies at the Rebuild Iraq show in Jordan last week. Just 13 US companies turned up at the exhibition, compared to more than 80 companies from Saudi Arabia and around 90 Turkish firms. Few major contracting groups attended the event which was dominated by supply companies, suggesting that construction companies may be reluctant to tolerate the security risks in the country while there are more lucrative opportunities to pursue elsewhere in the region. According to the US-based Brookings Institution, 232 American civilian and security contractors were killed in Iraq up to the end of December 2004. Reconstruction costs incurred by the US administration have skyrocketed over the last year as the security situation in the country has deteriorated. Contractors are paid even when they are not working and are employed on a ‘cost-plus’ basis which means they can claim for all unforeseen costs incurred on the project, and claim an additional bonus depending on performance.

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