"I see in the near future a crisis
approaching that unnerves me and causes me to tremble for the safety
of my country... Corporations have been enthroned, an era of corruption
in high places will follow, and the money-power of the country
will endeavor to prolong its reign by working upon the prejudices
of the people until the wealth is aggregated in a few hands and
the Republic is destroyed." --Abraham
Lincoln, November 12, 1864
"In the councils of government,
we must guard against the
acquisition of unwarranted influence, whether sought or unsought,
by the military- industrial complex." --President
Dwight D. Eisenhower, January 17, 1961
"Is there any man, is there any
woman, let me say any child here, that does not know that the seed
of war in the modern world is industrial and commercial rivalry?"
--Woodrow
Wilson, a year after the first world war ended
Last summer, in the lull of the August media doze, the Bush Administration's
doctrine of preventive war took a major leap forward. On August
5, 2004, the White House created the Office of the Coordinator
for Reconstruction and Stabilization, headed by former US Ambassador
to Ukraine Carlos Pascual. Its mandate is to draw up elaborate
"post-conflict" plans for up to twenty-five countries
that are not, as of yet, in conflict. According to Pascual, it
will also be able to coordinate three full-scale reconstruction
operations in different countries "at the same time,"
each lasting "five to seven years."
Fittingly, a government devoted to perpetual pre-emptive deconstruction
now has a standing office of perpetual pre-emptive reconstruction.
Gone are the days of waiting for wars to break out and then drawing
up
ad hoc plans to pick up the pieces. In close cooperation with
the National Intelligence Council, Pascual's office keeps "high
risk" countries on a "watch list" and assembles
rapid-response teams ready to engage in prewar planning and to
"mobilize and deploy quickly" after a conflict has gone
down. The teams are made up of private companies, nongovernmental
organizations and members of think tanks--some, Pascual told an
audience at the Center for Strategic and International Studies
in October, will have "pre-completed" contracts to rebuild
countries that are not yet broken. Doing this paperwork in
advance could "cut off three to six months in your response
time."
The plans Pascual's teams have been drawing up in his little-known
office in the State Department are about changing "the very
social fabric of a nation," he told CSIS. The office's mandate
is not to rebuild any old states, you see, but to create "democratic
and market-oriented" ones. So, for instance (and he was just
pulling this example out of his hat, no doubt), his fast-acting
reconstructors might help sell off "state-owned enterprises
that created a nonviable economy." Sometimes rebuilding,
he explained, means "tearing apart the old."
Few ideologues can resist the allure of a blank slate--that was
colonialism's seductive promise: "discovering" wide-open
new lands where utopia seemed possible. But colonialism is dead,
or so we are told; there are no new places to discover, no terra
nullius (there never was), no more blank pages on which, as Mao
once said, "the newest and most beautiful words can be written."
There is, however, plenty of destruction--countries smashed to
rubble, whether by so-called Acts of God or by Acts of Bush (on
orders from God). And where there is destruction there is reconstruction,
a chance to grab hold of "the terrible barrenness,"
as a UN official recently described the devastation in Aceh, and
fill it with the most perfect, beautiful plans.
"We used to have vulgar colonialism," says Shalmali
Guttal, a Bangalore-based researcher with Focus on the Global
South. "Now we have sophisticated colonialism, and they call
it 'reconstruction.'"
It certainly seems that ever-larger portions of the globe are
under active reconstruction: being rebuilt by a parallel government
made up of a familiar cast of for-profit consulting firms, engineering
companies, mega-NGOs, government and UN aid agencies and international
financial institutions. And from the people living in these reconstruction
sites--Iraq to Aceh, Afghanistan to Haiti--a similar chorus of
complaints can be heard. The work is far too slow, if it is happening
at all. Foreign consultants live high on cost-plus expense accounts
and thousand-dollar-a-day salaries, while locals are shut out
of much-needed jobs, training and decision-making. Expert "democracy
builders" lecture governments on the importance of transparency
and "good governance," yet most contractors and NGOs
refuse to open their books to those same governments, let alone
give them control over how their aid money is spent.
Three months after the tsunami hit Aceh, the New York Times ran
a distressing story reporting that "almost nothing seems
to have been done to begin repairs and rebuilding." The dispatch
could easily have come from Iraq, where, as the Los Angeles Times
just reported, all of Bechtel's allegedly rebuilt water plants
have started to break down, one more in an endless litany of reconstruction
screw-ups. It could also have come from Afghanistan, where President
Hamid Karzai recently blasted "corrupt, wasteful and unaccountable"
foreign contractors for "squandering the precious resources
that Afghanistan received in aid." Or from Sri Lanka, where
600,000 people who lost their homes in the tsunami are still languishing
in temporary camps. One hundred days after the giant waves hit,
Herman Kumara, head of the National Fisheries Solidarity Movement
in Negombo, Sri Lanka, sent out a desperate e-mail to colleagues
around the world. "The funds received for the benefit of
the victims are directed to the benefit of the privileged few,
not to
the real victims," he wrote. "Our voices are not heard
and not allowed to be voiced."
But if the reconstruction industry is stunningly inept at rebuilding,
that may be because rebuilding is not its primary purpose. According
to Guttal, "It's not reconstruction at all--it's about reshaping
everything." If anything, the stories of corruption and incompetence
serve to mask this deeper scandal: the rise of a predatory form
of disaster capitalism that uses the desperation and fear created
by catastrophe to engage in radical social and economic engineering.
And on this front, the reconstruction industry works so quickly
and efficiently that the privatizations and land grabs are usually
locked in before the local population knows what hit them. Kumara,
in another e-mail, warns that Sri Lanka is now facing "a
second tsunami of corporate globalization and militarization,"
potentially even more devastating than the first. "We see
this as a plan of action amidst the tsunami crisis to hand over
the sea and the coast to foreign corporations and tourism, with
military assistance from the US Marines."
As Deputy Defense Secretary, Paul Wolfowitz designed and oversaw
a strikingly similar project in Iraq: The fires were still burning
in Baghdad when US occupation officials rewrote the investment
laws and announced that the country's state-owned companies would
be privatized. Some have pointed to this track record to argue
that Wolfowitz is unfit to lead the World Bank; in fact, nothing
could have prepared him better for his new job. In Iraq, Wolfowitz
was just doing what the World Bank is already doing in virtually
every war-torn and disaster-struck country in the world--albeit
with fewer bureaucratic niceties and more ideological bravado.
"Post-conflict" countries now receive 20-25 percent
of the World Bank's total lending, up from 16 percent in 1998--itself
an 800 percent increase since 1980, according to a Congressional
Research Service study. Rapid response to wars and natural disasters
has traditionally been the domain of United Nations agencies,
which worked with NGOs to provide emergency aid, build temporary
housing and the like. But now reconstruction work has been revealed
as a tremendously lucrative industry, too important to be left
to the do-gooders at the UN. So today it is the World Bank, already
devoted to the principle of poverty-alleviation through profit-making,
that leads the charge.
And there is no doubt that there are profits to be made in the
reconstruction business. There are massive engineering and supplies
contracts ($10 billion to Halliburton in Iraq and Afghanistan
alone); "democracy building" has exploded into a $2
billion industry; and times have never been better for public-sector
consultants--the private firms that advise governments on selling
off their assets, often running government services themselves
as subcontractors. (Bearing Point, the favored of these firms
in the United States, reported that the revenues for its "public
services" division "had quadrupled in just five years,"
and the profits are huge: $342 million in 2002--a profit margin
of 35 percent.)
But shattered countries are attractive to the World Bank for
another reason: They take orders well. After a cataclysmic event,
governments will usually do whatever it takes to get aid dollars--even
if it means racking up huge debts and agreeing to sweeping policy
reforms. And with the local population struggling to find shelter
and food, political organizing against privatization can seem
like an unimaginable luxury.
Even better from the bank's perspective, many war-ravaged countries
are in states of "limited sovereignty": They are considered
too unstable and unskilled to manage the aid money pouring in,
so it is often put in a trust fund managed by the World Bank.
This is the case in East Timor, where the bank doles out money
to the government as long as it shows it is spending responsibly.
Apparently, this means slashing public-sector jobs (Timor's government
is half the size it was under Indonesian occupation) but lavishing
aid money on foreign consultants the bank insists the government
hire (researcher Ben Moxham writes, "In one government department,
a single international consultant earns in one month the same
as his twenty Timorese colleagues earn together in an entire year").
In Afghanistan, where the World Bank also administers the country's
aid through a trust fund, it has already managed to privatize
healthcare by refusing to give funds to the Ministry of Health
to build hospitals. Instead it funnels money directly to NGOs,
which are running their own private health clinics on three-year
contracts. It has also mandated "an increased role for the
private sector" in the water system, telecommunications,
oil, gas and mining and directed the government to "withdraw"
from the electricity sector and leave it to "foreign private
investors." These profound transformations of Afghan society
were never debated or reported on, because few outside the bank
know they took place: The changes were buried deep in a "technical
annex" attached to a grant providing "emergency"
aid to Afghanistan's war-torn
infrastructure--two years before the country had an elected government.
It has been much the same story in Haiti, following the ouster
of President Jean-Bertrand Aristide. In exchange for a $61 million
loan, the bank is requiring "public-private partnership and
governance in the education and health sectors," according
to bank documents--i.e., private companies running schools and
hospitals. Roger Noriega, US Assistant Secretary of State for
Western Hemisphere Affairs, has made it clear that the Bush Administration
shares these goals. "We will also encourage the government
of Haiti to move forward, at the appropriate time, with restructuring
and privatization of some public sector enterprises," he
told the American Enterprise Institute on April 14, 2004.
These are extraordinarily controversial plans in a country with
a powerful socialist base, and the bank admits that this is precisely
why it is pushing them now, with Haiti under what approaches military
rule. "The Transitional Government provide[s] a window of
opportunity for implementing economic governance reforms...that
may be hard for a future government to undo," the bank notes
in its Economic Governance Reform Operation Project agreement.
For Haitians, this is a particularly bitter irony: Many blame
multilateral institutions, including the World Bank, for deepening
the political crisis that led to Aristide's ouster by withholding
hundreds of millions in promised loans. At the time, the Inter-American
Development Bank, under pressure from the State Department, claimed
Haiti was insufficiently democratic to receive the money, pointing
to minor irregularities in a legislative election. But now that
Aristide is out, the World Bank is openly celebrating the perks
of operating in a democracy-free zone.
The World Bank and the International Monetary Fund have been
imposing shock therapy on countries in various states of shock
for at least three decades, most notably after Latin America's
military coups and the collapse of the Soviet Union. Yet many
observers say that today's disaster capitalism really hit its
stride with Hurricane Mitch. For a week in October 1998, Mitch
parked itself over Central America, swallowing villages whole
and killing more than 9,000. Already impoverished countries were
desperate for reconstruction aid--and it came, but with strings
attached. In the two months after Mitch struck, with the country
still knee-deep in rubble, corpses and mud, the Honduran congress
initiated what the Financial Times called "speed sell-offs
after the storm." It passed laws allowing the privatization
of airports, seaports and highways and fast-tracked plans to privatize
the state telephone company, the national electric company and
parts of the water sector. It overturned land-reform laws and
made it easier for foreigners to buy and sell property. It was
much the same in neighboring countries: In the same two months,
Guatemala announced plans to sell off its phone system, and Nicaragua
did likewise, along with its electric company and its petroleum
sector.
All of the privatization plans were pushed aggressively by the
usual suspects. According to the Wall Street Journal, "the
World Bank and International Monetary Fund had thrown their weight
behind the [telecom] sale, making it a condition for release of
roughly $47 million in aid annually over three years and linking
it to about $4.4 billion in foreign-debt relief for Nicaragua."
Now the bank is using the December 26 tsunami to push through
its cookie-cutter policies. The most devastated countries have
seen almost no debt relief, and most of the World Bank's emergency
aid has come in the form of loans, not grants. Rather than emphasizing
the need to help the small fishing communities--more than 80 percent
of the wave's victims--the bank is pushing for expansion of the
tourism sector and industrial fish farms. As for the damaged public
infrastructure, like roads and schools, bank documents recognize
that rebuilding them "may strain public finances" and
suggest that governments consider privatization (yes, they have
only one idea). "For certain investments," notes the
bank's tsunami-response plan, "it may be appropriate to utilize
private financing."
As in other reconstruction sites, from Haiti to Iraq, tsunami
relief has little to do with recovering what was lost. Although
hotels and industry have already started reconstructing on the
coast, in Sri Lanka, Thailand, Indonesia and India, governments
have passed laws preventing families from rebuilding their oceanfront
homes. Hundreds of thousands of people are being forcibly relocated
inland, to military style barracks in Aceh and prefab concrete
boxes in Thailand. The coast is not being rebuilt as it was--dotted
with fishing villages and beaches strewn with handmade nets. Instead,
governments, corporations and foreign donors are teaming up to
rebuild it as they would like it to be: the beaches as playgrounds
for tourists, the oceans as watery mines for corporate fishing
fleets, both serviced by privatized airports and
highways built on borrowed money.
In January Condoleezza Rice sparked a small controversy by describing
the tsunami as "a wonderful opportunity" that "has
paid great dividends for us." Many were horrified at the
idea of treating a massive human tragedy as a chance to seek advantage.
But, if anything, Rice was understating the case. A group
calling itself Thailand Tsunami Survivors and Supporters says
that for "businessmen-politicians, the tsunami was the answer
to their prayers, since it literally wiped these coastal areas
clean of the communities which had previously stood in the way
of their plans for resorts, hotels, casinos and shrimp farms.
To them, all these coastal areas are now open land!"
Halliburton awarded pact though audit showed
shoddy billing
Eric Rosenberg, Hearst Newspapers
Sunday, May 16, 2004
Washington -- The Army last year awarded an Iraqi reconstruction
contract worth up to $8.2 billion to a Halliburton Co. subsidiary,
despite warnings from Pentagon auditors that the company had a
shoddy billing system that could lead to overcharges.
The no-competition contract to help Iraq's oil industry was awarded
by the Army Corps of Engineers just eight months after a separate
Pentagon unit, the Defense Contract Audit Agency, reported on
Aug. 2, 2002, that it had found "significant deficiencies"
in the billing methods of Halliburton's Kellogg, Brown and Root
Services (KBR) unit.
The deficiencies "have adversely affected the organization's
ability to record, process, summarize and report billings"
charged to U.S. military contracts, said the audit, obtained under
the Freedom of Information Act over Halliburton's objections.
Unless the company fixed its billing system, the auditors warned,
"the result is significant over- and under-billed costs"
to the government.
Titled "Report on Audit of Billing System Internal Controls,"
the audit was performed by the Defense Contract Audit Agency's
Houston branch office.
The audit agency said last week that those deficiencies have
never been fixed but were not sufficiently grave to disqualify
KBR from additional Pentagon contracts.
The Iraqi oil contract was awarded on a noncompetitive basis
and came after the Pentagon had signed up KBR for a contract worth
up to $9.4 billion to provide logistics for U.S. troops around
the world.
Halliburton, an energy services giant headed by Vice President
Dick Cheney from 1995 to 2000, is one of the largest U.S. companies
operating in Iraq.
Since the 2002 audit, KBR has come under fire for an array of
alleged financial irregularities, including overcharges related
to fuel and food for troops.
In a written statement, Wendy Hall, a Halliburton spokeswoman,
said the conclusions of the 2002 audit were "unrelated"
to the other alleged irregularities and that all "current
billings have been prepared properly, processed efficiently and
paid by the government in a timely manner."
But Marine Corps Lt. Col. Rose-Ann L. Lynch, a spokeswoman for
the audit agency, said in a written statement last week that KBR
still has not fixed the billing problems and that the audit agency
has uncovered six more failures. One of the six -- poor financial
controls at KBR's troop dining facility operations -- has resulted
in "significant overbillings to the government," Lynch
said.
At the time of the 2002 audit, KBR "did not have written
general policies and procedures" for its employees on the
proper processes to follow when billing the government, government
auditors concluded. KBR still has not fixed this, the Defense
Contract Audit Agency said last week.
A second major problem centered on poor recordkeeping, and the
auditors found that KBR didn't have financial controls in place
to promptly assess how much overhead expense could be charged
to the government. It still has not fixed this, the agency said.
The company billed the government for certain "unallowable
and nonallocable" travel costs from the late 1990s, even
though the company had earlier agreed not to do so, the auditors
said. They determined that the lack of written company-wide billing
procedures contributed to the submission of the inappropriate
bills to the military.
The reports of U.S. soldiers abusing Iraqi prisoners during interrogations
are both horrifying and depressing. Fortunately, there is a clear
and proper legal response. Those accused will be court-martialed
and, if found guilty, they will be punished.
But the story, sadly, does not end there. It now appears that
this deeply disturbing episode -- in which Iraqi prisoners were
beaten, sexually assaulted and forced to perform simulated sexual
acts, among other things -- may have involved not only soldiers
but also private contractors hired as interrogators.
That private contractors are interrogators in U.S. prison camps
in Iraq should be stunning enough. This is incredibly sensitive
work and takes our experiment with the boundaries of military
outsourcing to levels never anticipated. But even more outrageous
is the fact that gaps in the law may have given them a free pass
so that it could be impossible to prosecute them for alleged criminal
behavior.
Most people by now know that in an attempt to fill the gap between
the demand for professional forces and the limited number deployed
by the Pentagon, an array of traditional military and intelligence
roles have been outsourced in Iraq, all without public discussion
or debate. There are 15,000 to 20,000 private military contractors
operating in Iraq, outsourcing critical military roles from logistics
and local Army training to guarding installations and convoys.
This outsourcing of critical roles to private companies represents
a sea change in the way we fight a war.
However, until the last few days, not many Americans were aware
that private firms were also providing interrogators and translators
in the prisons. According to recent reports, the Army's investigation
of the abuses committed at Abu Ghraib prison near Baghdad in November
and December named CACI International Inc. in Virginia and Titan
Corp. of San Diego. Titan, however, denies having contracts that
involve working with prisoners.
The Army investigation discovered such depraved behavior as making
prisoners perform simulated sex acts and form naked human pyramids
and putting "glow sticks" in bodily orifices. The perpetrators
even took more than 60 photographs, including one showing an Iraqi
prisoner standing on a box with his head covered and wires attached
to his hands and genitals. He was told that if he fell off the
box he would be electrocuted. One civilian contractor was even
accused of raping a male juvenile prisoner.
The Army has responded swiftly and correctly, at least with regard
to its soldiers. Seventeen soldiers were relieved of duty and
six face court-martial. As Army spokesman Brig. Gen. Mark Kimmit
said: "We're appalled ... they wear the same uniform as us,
and they let their fellow soldiers down. ... These acts that you
see in these pictures may reflect the actions of individuals,
but, by God, it doesn't reflect my Army."
But although the military has established structures to investigate,
prosecute and punish soldiers who commit crimes, the legal status
of contractors in war zones is murky. Soldiers are accountable
to the military code of justice wherever they are, but contractors
are civilians -- not formally part of the military and not part
of the chain of command. They cannot be court-martialed.
Normally, an individual's crimes would then fall under the local
nation's laws. But, of course, there are few established Iraqi
legal institutions -- that is why we are running prisons in Iraq
in the first place -- and, besides, coalition regulations explicitly
state that contractors don't fall under their scope.
In turn, because the acts were committed abroad, and also reportedly
involve some contractors who are not U.S. citizens, the application
of U.S. domestic law in an extraterritorial setting is unclear
and has never been tested. This appears to leave an incredible
vacuum. Indeed, as Phillip Carter, a former Army officer now at
UCLA Law School, says, "Legally speaking, [military contractors
in Iraq] actually fall into the same gray area as the unlawful
combatants detained at Guantanamo Bay."
So far, none of the contractors involved has been criminally
prosecuted. As for the contractor accused of raping a prisoner
in his mid-teens, Central Command spokesperson Col. Jill Morgenthaler
told the British newspaper the Guardian: "We had no jurisdiction
over him. It was left up to the contractor on how to deal with
him." It is clear that our policies on military contractors
must be updated.
If found to be involved by investigators, the contractors should
not escape prosecution. Yet that's exactly what happened in the
Balkans when several DynCorp employees, working as military contractors,
were implicated in the trafficking of women and other sex crimes.
Felony crimes merit harsher punishment than simply the end of
a good paycheck.
This may require breaking new legal ground, such as testing the
extraterritorial standards for civilian prosecution, requiring
detention of the suspects until the Iraqi legal system gathers
strength or even transferring jurisdiction to the international
court.
To not only pay contractors more than our soldiers but also give
them a legal free pass is unconscionable.
More broadly, the United States must re-examine which military
and intelligence roles are appropriate for outsourcing and which
are not. For the roles that we do choose to outsource, we must
close the gaps in the law. The overwhelming number of contractors
are probably just as sickened and embarrassed by this behavior
as the American military and the public.
That is why we have laws in the first place: to govern for the
worst of human behavior, not hope for the best. The private military
field should be no different.
P.W. Singer, a fellow at the Brookings Institution, is the
author of "Corporate Warriors: Rise of the Privatized Military
Industry" (Cornell University Press, 2004). This commentary
originally appeared in the Los Angeles Times.
LOS ANGELES (AP) -- Pentagon adviser Richard Perle briefed an
investment seminar on ways to profit from conflicts in Iraq and
North Korea just weeks after he received a top-secret government
briefing on the crises in the two countries, the Los Angeles Times
reported Wednesday.
Perle, who until March was chairman of the Defense Policy Board,
a group of outside advisers to the Pentagon, also serves on the
board of several defense contractors. The revelation raises concerns
about conflicts of interest.
The Times reported that Perle attended a Defense Intelligence
Agency briefing in February and three weeks later participated
in a Goldman Sachs conference call in which he advised investors
in a talk titled ``Implications of an Imminent War: Iraq Now.
North Korea Next?''
Perle did not return phone calls or e-mails from the newspaper
seeking comment.
One of Defense Secretary Donald Rumsfeld's closest advisers,
Perle was a vocal advocate of going to war against Iraq and publicly
questioned the reliability of some longtime U.S. allies, including
France and Saudi Arabia.
He resigned as chairman of the Defense Policy Board on March
27 after it was reported he had worked as a consultant to bankrupt
telecommunications company Global Crossing Ltd., which was trying
to get Pentagon approval to be sold to Asian investors.
In offering his resignation, Perle, 61, denied any wrongdoing
and said he didn't want questions about his outside interests
to be a distraction to Rumsfeld. He remained a member of the board.
``The guiding principle here is that you do not give advice in
the Defense Policy Board on any particular matter in which you
have an interest,'' he said at the time. ``And I don't do that.
I haven't done that.''
Rep. John Conyers Jr., D-Mich., the ranking Democrat on the House
Judiciary Committee, has asked the Pentagon's inspector general
to investigate Perle's business activities and any conflicts they
might pose for his membership.
Editor [SF Chronicle] -- Tom Abate's Bechtel profile ("Bechtel:
From the ground up", April 8) failed to critically examine
a company that has a history of unethical and anti-democratic
actions. One example is Bechtel's involvement in the privatization
of essential utilities.
Bechtel, working closely with the World Bank, was the sole bidder
in a 40- year contract to operate the municipal water services
of Cochabamba, Bolivia's third-largest city. Within a few months
of Bechtel taking over, in February 2002, water rates skyrocketed
and many families were forced to choose between paying exorbitant
water bills or their rent. After a citizens' revolt in the streets,
the contract was terminated and Bechtel was kicked out of the
country.
Yet Bechtel is now using a secret tribunal -- a branch of the
World Bank -- to sue one of the poorest countries in Latin America
for $25 million in lost profits the company expected to make on
this ill-gotten, illegitimate contract.
The people of Bolivia, 300 organizations from around the world,
and even the San Francisco Board of Supervisors have petitioned
Bechtel to drop this closed-door suit. Is this the "ethical
behavior and outstanding performance" to which the company
spokesman refers?
Connections are fact of business for major construction companies
David R. Baker,
Chronicle Staff Writer
Sunday, April 20, 2003
Even before Bechtel Corp. won a multimillion-dollar contract
last week to rebuild Iraq, critics cried favoritism.
They noted the firm's many White House ties, spanning several
administrations, not to mention its generosity as a political
donor.
The same, however, could be said of most every company considered
for the Iraq job. Within the handful of construction firms capable
of rebuilding an entire country, government connections are a
fact of business.
"Go down the list of every other company -- they're all
connected," said Peter Singer, a Brookings Institution fellow
and author of "Corporate Warriors" on the private military
industry.
That troubles many critics, who worry that in dealing with the
same people in the same companies, the government may not get
the least expensive, or most innovative, approach to its work.
OLD BOYS CLUB TOUGH TO ENTER
"It's an old boys network, and it's impossible for new boys
to crack into it," said Christopher Hellman, a senior analyst
at the Center for Defense Information think tank in Washington.
"The reality is, you and I could form a construction company
and bid on the Bechtel thing, but we're never going to win it.
So it's hard to see that it's a competitive environment."
That said, Hellman said he doesn't know how to change the situation.
Smaller firms don't have much opportunity to amass the long track
record the government demands on major construction projects.
And those companies have every incentive to hire ex-government
officials and employees who may know both the people in power
and the procedures for getting federal work.
"To a certain extent, this stuff is self-perpetuating,"
Hellman said.
Complaints of favoritism even led Rep. Henry Waxman, D-Los Angeles,
to call for an investigation of the process for picking firms
to work in Iraq. The General Accounting Office reported last week
that it will review the process.
Bechtel, for its part, insists that its knack for landing big
contracts comes from its experience and the quality of its work.
"We won this work on our record, plain and simple,"
Chief Executive Officer Riley Bechtel told employees in an e-mail
message Friday. "We have a decades- long record of experience
and performance on tough jobs under tough conditions,
including the Kuwait oil fires and scores of other projects in
the Middle East and around the world. It's a record that few,
if any, companies in the world can match."
There are a few firms in the same echelon as Bechtel. The companies
that have been vying for work in Iraq have sterling connections.
Halliburton Co., which capped Iraqi oil well fires, has a former
chief executive officer, Dick Cheney, now serving as America's
vice president. Fluor Corp., which bid on the reconstruction job
landed by Bechtel, has a former head of the National Security
Agency and deputy director of the Central Intelligence Agency
on its board.
Bechtel has executives serving on President Bush's export council
and the Defense Policy Board, an influential Pentagon advisory
panel. George Shultz, Ronald Reagan's secretary of state, sits
on its corporate board. Reagan's secretary of defense, Caspar
Weinberger, was once the company's general counsel and served
on its board of directors.
The ties go beyond high-profile public officials and top executives.
Construction companies, even the smaller ones not bidding for
work in Iraq, often hire people from the government agencies they
deal with.
Michael Garvin, assistant professor of civil engineering at Columbia
University, said that whenever a new administration sets up shop
in Washington, many government workers from the previous administration
have to find jobs.
"People who would have been watching construction from the
public side now find themselves looking for employment in the
private side," he said. "So there's a natural transfer
of people. . . . That doesn't mean companies don't look to attract
key public officials because they're either politically connected
or because they know the ins and outs of organizations."
CONNECTIONS DOWNPLAYED
The companies bidding for Iraq reconstruction contracts, and the
government agencies handing them out, insist that connections
haven't played a role in the process. Andrew Natsios, head of
the U.S. Agency for International Development, told those in charge
of the selection process to notify him if anyone tried to lobby
on a firm's behalf, said agency spokesman Luke Zahner.
"This was strictly by the book," Zahner said. "Mr.
Natsios has said all along it would be absolutely, utterly inappropriate
for there to be any phone calls to him or anything like that."
USAID, which awarded Bechtel a reconstruction contract worth
up to $680 million, chose the company based on the cost of its
bid as well as its technical capabilities, experience and past
performance, Zahner said. Those last requirements automatically
limited the number of companies eligible to bid.
"There are very few, actually, that are capable of handling
jobs of this magnitude," Zahner said.
Is Dick Cheney still on Halliburton’s payroll? Even though
he supposedly sold off his assets when he moved to Washington,
the vice president’s financial records reveal he is receiving
between $100,000 and $1 million in “deferred compensation”
from the company where he served as CEO for five years. The payment
is not a bonus for a job well done: Cheney decided to take his
severance package over five years instead of in a lump sum. Nonetheless,
as his former company rakes in millions in new contracts from
the war Bush and Cheney are presently pursuing in Iraq, one has
to ask, “Who does Cheney work for?”
Even as the war rages on, Halliburton subsidiary Kellogg Brown
& Root (KBR) is lining up for contracts to rebuild Iraq. According
to the Wall Street Journal, this could be the “largest government
reconstruction effort since Americans helped to rebuild Germany
and Japan after World War II.” And while it is too soon to
say exactly how much reconstruction will cost or how much profit
is at stake, Michael Urban, an analyst with Deutsche Bank, estimates
that Halliburton and other companies could reap $3 billion in
infrastructure and restoration work.
But is Halliburton right for the job? Critics argue that the
U.S. Agency for International Development ignored the expertise
and experience of well-regarded NGOs with decades of experience
in humanitarian work in Iraq in their secretive contract process.
USAID asked just five for-profit corporations to submit bids for
$900 million in reconstruction contracts for the initial phase
of work, scheduled to last just six months. Of course, these companies
will be best situated to win billions in future contracts. An
American Academy of Arts and Sciences report estimated that the
reconstruction of Iraq could cost anywhere from $30 billion to
$105 billion over the next decade.
KBR not only has the corner on postwar reconstruction, they were
also granted a potentially huge contract to fight oil well fires
throughout Iraq, even though they did not submit a bid for the
job. In November, the Pentagon hired KBR to write a classified
contingency plan for dealing with the fires, allowing the company
to position itself for this job long before the war was a fait
accompli. President Bush just asked Congress for $500 million
for oil field repair, and KBR is standing by to take the money.
The war on terrorism, which Cheney warned might never end-”at
least not in our lifetime”-promises profits almost guaranteed
to last a lifetime. In December 2001, the company was granted
an open-ended contract for Army troops supply and Navy construction.
KBR is providing planning, base camp and facilities maintenance,
laundry, food and airfield services, and property accountability
wherever U.S. troops go in the next 10 years. So far they have
gone to Afghanistan, the Philippines, Yemen, Iraq and probably
other countries the public has not yet been told about.
The contract is unique in that there is no ceiling on cost. So
while the deal could be worth billions, it’s unclear how
many billions. KBR will be reimbursed for every dollar spent plus
a base fee of 1 percent, which guarantees profit. On top of that,
if the military is pleased with KBR’s performance, they’ll
add a bonus, calculated as a percentage of the company’s
costs. Contract expert Steve Schooner, a law professor at George
Washington University, described the deal as an unprecedented
way of saying, “Come up with creative ways to spend my money,
and the more you spend, the happier I’ll be.”
In addition to KBR’s blank check, they have been granted
several other contracts related to the war on terrorism:
$2 million to reinforce the U.S. Embassy in Tashkent, Uzbekistan,
in November 2001;
$100 million to convert the Subic Bay U.S. Navy base in the Philippines
into a modern commercial port facility, in the same month;
$16 million to build a prison for captured Taliban fighters at
Guantanamo Bay, Cuba, in March 2002.
All of this has not escaped the attention of critics of the Bush
administration. Rep. Maxine Waters (D-California) recently offered
an amendment in the House that would restrict companies that enjoy
close ties to the administration from bidding on government rebuilding
contracts. The measure was roundly defeated. Waters notes: “Given
the suspicion that many Americans have about why we’re going
to war and the constant speculation that we’re at war for
oil, I think the vice president should do everything he can to
remove even the appearance of conflicts of interest.”
Frida Berrigan is a senior research associate with the Arms
Trade Resource Center, a project of the World Policy Institute.
Richard Perle: It Pays To Be the Prince of Darkness
By Frida Berrigan
3.21.03
Richard Perle is a busy guy these days, what with his long-desired
war against Iraq in full swing, plus a lucrative consulting business
on the side. As the chairman of the Defense Policy Board, Perle
is a close adviser to Defense Secretary Donald Rumsfeld, with
an insider’s perspective on the Pentagon, the war in Iraq
and the ongoing war on terrorism. As a major investor in a number
of defense companies, he stands to reap considerable benefits
from war and homeland security contracts. Apparently his dual
roles as a major policy adviser to the Pentagon and a business
dealmaker can be a bit confusing at times.
A few weeks ago, Perle was hired by Global Crossing, the bankrupt
telecommunications giant that is trying to sell itself to a Chinese
consortium. The Pentagon and FBI are against the sale because
it would put the company’s fiber optics network, which is
used by the U.S. government, in Chinese hands. Perle’s job
is to change their minds. And if anyone can, it is the “Prince
of Darkness,” as Perle is known by friend and foe in Washington.
As he said in an affidavit dated March 7, his position as chairman
of the Defense Policy Board gives him a “unique perspective
on and intimate knowledge of the national defense and security
issues that will be raised by the CFIUS review process.”
The CFIUS, the Committee on Foreign Investment in the United States,
has the power to block the deal. Global Crossing is paying Perle
$750,000 for this “unique perspective” and “intimate
knowledge.” Perle’s incentive: $600,000 of his fee is
contingent on government approval of the deal.
But this little phrase led to a funny exchange with New York
Times reporter Stephen Labaton. Perle insisted, “I’m
not using public office for private gain, because the Defense
Policy Board has nothing to do with the CFIUS process.” But
when asked about his “unique perspective” and “intimate
knowledge,” Perle claimed he had not noticed that phrase,
saying it “was drafted by lawyers, and frankly I did not
notice it.” He is a busy man, we understand.
But then, he called Labaton back to clarify, saying that the
problematic phrase was in an earlier draft, he had noticed it
and crossed it out. “You have a draft that I never signed,”
he said. OK?
After consulting with Global Crossing’s lawyers, Perle called
Labaton again to say that he had told the lawyers to strike the
phrase because it “seemed inappropriate and irrelevant.”
But then someone put the phrase back in, and Perle signed it without
noticing. “It is a clerical error,” he explained, “and
not my clerical error.” When in doubt, blame the lawyers.
So the final version will be submitted without referring to Perle’s
“unique perspective” and “intimate knowledge.”
But that doesn’t mean those are not what Global Crossing
is paying him for.
-----------------------
This is not the first time someone has questioned Perle’s
ethics. Pulitzer Prize-winner Seymour Hersh, writing in the March
17 issue of The New Yorker, cited possible “conflicts of
interest” in Trireme Partners, Perle’s venture capital
company. The company, which invests in companies dealing in homeland
security and defense products, has raised $45 million in capital
so far—almost half of that coming from U.S. defense giant
Boeing. When asked about the article in a TV interview, Perle
declared that “Sy Hersh is the closest thing American journalism
has to a terrorist, frankly.”
There is also the matter of Autonomy Corporation, where Perle
is a director, with 75,000 shares of stock. The firm has developed
a high-tech eavesdropping software that is capable of monitoring
hundreds of thousands of e-mail and phone conversations at the
same time. In October 2002, the Department of Homeland Security
granted the company a huge contract. A few months later, Autonomy
was granted $1 million in contracts from a number of government
agencies, including the Secret Service and National Security Agency.
As a former Clinton adviser observed with admiration, Perle “enjoys
all the benefits of being an insider without any of the constraints.”
Frida Berrigan is a senior research associate with the Arms Trade
Resource Center, a project of the World Policy Institute.
Bechtel, Halliburton in running for huge, emergency-basis
contract
Peter Slevin, Mike Allen, Washington Post
Tuesday, March 11, 2003
Washington -- The Bush administration, preparing what would be
the most ambitious U. S. rebuilding project since the aftermath
of World War II, expects in coming days to award a construction
contract worth hundreds of millions of dollars to begin remaking
Iraq, U.S. officials said Monday.
The huge umbrella contract, the first to be awarded, would pay
for construction and repairs to roads and bridges, as well as
schools, hospitals and mosques, officials said. Other large deals
are under negotiation to jump- start a reconstruction effort that
would follow an overthrow of Iraqi President Saddam Hussein.
A handful of U.S. construction giants -- including San Francisco's
Bechtel Group Inc. as well as Halliburton Co. and Fluor Corp.
-- were invited to bid for the work on an emergency basis. Analysts
said the companies hope to win the contract and position themselves
for such future projects as the repair and development of the
country's oil industry.
U.S. authorities, wary of a potential backlash to a U.S.-led
invasion and military occupation, hope to convince Iraqis that
the extraordinary attempt to overhaul Iraq merits their support.
They believe they can win hearts and minds by showing fast results,
feeding hungry Iraqis, delivering clean water and helping to pay
teachers and health workers while a new government is being constructed.
The U.S. Agency for International Development is seeking companies
to handle such projects as renovating the country's largest airports,
resuscitating electrical grids and printing textbooks.
The administration will seek from Congress the billions of dollars
necessary for the initial military and civilian postwar effort
if the White House challenges Iraq with force. U.S. diplomats
have been seeking financial commitments from other countries.
Planners also hope Iraqi oil revenue can help pay for reconstruction.
The initial construction contract could be as large as $900 million,
U.S. officials have said. One planner called the number a ceiling
and predicted the actual amount of the umbrella contract would
be lower.
"The United States is probably going to have to pick up
the bulk of what's going to happen in reconstruction, at least
at the outset," said Bathsheba Crocker, co-author of a report
on post-Hussein Iraq at the Center for Strategic and International
Studies. "It's acknowledged even by them that it's going
to be a drop in the bucket compared to what the overall costs
will be."
To speed the project, USAID invoked special authority to solicit
bids from selected companies, which include the Louis Berger Group
Inc., a significant U. S. contractor in Afghanistan. The move
bypassed the usual rules that would have permitted a wider array
of companies to seek the contract.
Vice President Dick Cheney spent five years as chief executive
of one competitor, Houston energy services company Halliburton.
The Pentagon said Thursday that Halliburton subsidiary Kellogg
Brown & Root is developing a plan under an existing contract
to fight Iraqi oil well fires.
The "urgent circumstances and the unique nature of this
work" justify the procedures, said Ellen Young, a spokeswoman
for the international development agency. Yount. Officials said
the winner is certain to farm out work to other companies inside
and outside Iraq.
Construction industry executives said the firms are competing
fiercely in part because they believe the work could provide an
inside track to postwar business opportunities. A significant
prize: oil industry contracts.
"It's a sensitive topic, because we still haven't gone to
war, but these companies are really in a position to win something
out of this geopolitical situation," an industry executive
said. It remains unclear whether Iraqis, Americans or an international
consortium will manage the oil industry during an early post-conflict
period.
Steven Schooner, a George Washington University law professor,
said many billions of dollars are at stake. He estimated that
$900 million would barely last for six months given the scope
of the projects the administration has mapped.
"The most sophisticated firms that come in first and establish
goodwill with the locals obviously will reap huge benefits down
the road," said Schooner. "These are going to become
brand names in Iraq. That's huge."
Bechtel spokesman Jonathan Marshall said, "We hope for a
peaceful settlement in Iraq, but if there is a role for U.S. companies
in helping to rebuild Iraq's infrastructure, Bechtel would have
the skills and would be well suited for such a job."
The Americans have been working with the U.N. World Food Program
and other U.N. agencies to manage Iraq's food distribution network
and the care of displaced Iraqis. The international development
agency has established loose targets for an immediate post-conflict
period and the following 18 months, emphasizing that it expects
the United States to have international help in fulfilling the
goals.
On electricity, for example, the international development agency
foresees the installation of 550 diesel generators within 60 days
and the restoration of power to 75 percent of the 1991 level within
18 months. Officials caution that such plans are heavily contingent
on the amount of wartime damage.
On education, the international development agency envisions
the repair of 3,000 schools and the delivery of supplies to 12,500
schools. By that point, teacher training would be under way and
U.S. universities would be providing expertise.
By 18 months, if the targets are met, basic health services would
be available to all Iraqis and local government would be financially
self- supporting, according to predictions by the international
development agency .
Edward Epstein,
Chronicle Washington Bureau
Saturday, March 8, 2003
Washington -- A company tied to Vice President Dick Cheney has
won a Pentagon contract for advice on rebuilding Iraq's oil fields
after a possible war.
The contract was disclosed in the last paragraph of a Defense
Department statement on preparations for Saddam Hussein's possible
destruction of Iraq's oil fields in the event of a U.S.-led invasion.
The statement calls for proposals on how to handle oil well fires
and for assessing other damage to oil facilities. The contract
went to Kellogg Brown & Root Services, which is owned by Halliburton
Co., of which Cheney was chairman until his election in 2000.
The Houston company is a respected name in petroleum industry
construction and one of a few companies capable of large-scale
oil field reconstruction. But its ties to Cheney arouse suspicions
