http://story.news.yahoo.com/news?tmpl=story&u=/ap/20030419/ap_on_re_mi_ea/iraq_bechtel_8
Bechtel's Political Clout Helps Iraq Bid
Sat Apr 19,11:29 AM ET
By MICHAEL LIEDTKE, AP Business Writer
SAN FRANCISCO - It's not just a history of building landmarks like the Hoover Dam that helped Bechtel Corp. win the first major Iraq reconstruction contract. The company is as well-connected as Washington insiders come.
Bechtel not only has close ties with elder Republican statesmen, its executives also enjoy direct links to the Bush administration, which has critics crying cronyism.
Many worry that Bechtel's inside-the-Beltway cachet was as important to its successful bid as any technical advantage over competitors.
The initial $34.6 million contract announced Thursday by the U.S. Agency for International Development could spiral far beyond its projected $680 million price tag.
And Bechtel is widely perceived as the front-runner for future business as the United States spends up to $100 billion in what's seen as the biggest reconstruction project since World War II's aftermath.
The San Francisco-based company has grown over decades from a family business into a privately held international engineering powerhouse.
Other companies invited to submit bids were Pasadena-based Parsons Corp.; Fluor Corp.; Louis Berger Group Inc.; and Washington Group International Inc. A subsidiary of Halliburton Co., which was formerly run by Vice President Dick Cheney, was invited to bid but removed itself amid favoritism charges.
At least two current Bechtel executives have ties to the Bush administration.
A senior vice president, Jack Sheehan, sits on the Defense Policy Board formed to advise Defense Secretary Donald Rumsfeld, who himself once lobbied for a Bechtel project. Sheehan, a retired Marine Corps general, manages Bechtel's petroleum and chemical operations.
And President Bush appointed Bechtel's chairman, Riley Bechtel, in February to the Export Council, which advises the president on international trade matters.
Bechtel says its politically connected executives are a small part of a 47,000-employee team working on 900 projects in nearly 60 countries.
"It's our business to have knowledgeable people so we can have the breadth and depth of talent to tackle the things that most other people in the world can't," said Bechtel spokesman Jeff Berger.
Bechtel's accomplishments range from the Depression-era Hoover Dam to the transformation of a former Saudi Arabian fishing village into Jubail, an industrial city expected to house 370,000 residents.
It's that kind of track record that made Bechtel a natural candidate for the reconstruction of Iraq, federal officials say.
The government limited the field to an exclusive group for security reasons, as well as a desire to start the work quickly, USAID spokesman Luke Zahner said. "The reality is that there are only a few companies that can handle a contract of this size."
Bechtel's critics don't doubt the company is up to the job. Instead, they say that by limiting the bidding to Bechtel and five other U.S. companies, the federal government might not have gotten the best free-market deal.
"We are concerned that the government seems to be handpicking their buddies for these contracts," said Seth Morris, research associate for the nonpartisan Washington-based Project on Government Oversight.
In recent weeks, protesters have gathered outside Bechtel's headquarters for vitriolic rallies.
Riley Bechtel, 51, is the great-grandson of company founder Warren Bechtel and has been chief executive for 13 years. He has emerged as one of the world's richest people with an estimated fortune of $3.2 billion, according to Forbes magazine.
The company has backed its personal contacts within Washington with sizable campaign contributions. Bechtel gave $1.3 million to political candidates from 1999 through 2002, according to the Center for Responsive Politics.
That's a lot less than other influential businesses. The donations look like small change compared to the money Bechtel earns from the government.
In the fiscal year ended in September 2002, the Department of Defense paid Bechtel $1.03 billion, making it the 17th largest military contractor in the country.
Bechtel's revenue from all contracts totaled $11.6 billion in 2002, a 13 percent decline from $13.4 billion in the previous year. The company signed new contracts worth $12.7 billion, a 37 percent increase from $9.3 billion in 2001.
The Iraq contract is just the latest example of Bechtel winning a big government job from a friendly administration.
After serving as treasury secretary in the Nixon administration, George Shultz was Bechtel's president for seven years before he left in 1981 to become secretary of state in the Reagan administration.
And Casper Weinberger was its general counsel and served on the company's board from 1975-81 before becoming secretary of defense under Reagan.
While Shultz was America's top diplomat, the U.S. government tried unsuccessfully to persuade Saddam Hussein to let Bechtel build a pipeline to carry Iraqi crude oil through Jordan to the Red Sea port of Aqaba.
In 1983, Rumsfeld, while working as a special U.S. envoy in the Middle East, traveled to Baghdad to discuss the pipeline with Saddam and Iraq's Deputy Prime Minister Tariq Aziz, according to memos in the National Archives.
Iraq nixed the pipeline idea in 1986. Shultz has since returned to Bechtel's board of directors.
Bechtel exemplifies "the revolving door between government and business that Washington has helped perpetuate for years," said Jim Vallette, a research director at the Institute for Policy Studies, a nonpartisan Washington-based think tank. "We should have a separation between the state and corporations. Instead, they're acting more like partners."
