*EPF315 03/26/2003
U.S. Aid Effort For Iraq Largest Since Marshall Plan
(Foreign firms can bid on subcontracts for U.S. funded projects) (1100)

By Edmund F. Scherr
Washington File Special Correspondent

Washington -- A U.S. aid official says the U.S. relief and reconstruction effort for Iraq will be the largest U.S. aid project since the nation's Marshall Plan for Western Europe after World War II.

Andrew Natsios, administrator of the U.S. Agency for International Development (USAID) also told an audience at the Washington Foreign Press Center on March 26 that foreign firms could bid on subcontracts for U.S. funded reconstruction projects in Iraq.

Given the scope of the contracts, USAID estimates that some 50 percent of U.S. reconstruction funds (some 900 million dollars) could go to foreign subcontractors. By federal law, he pointed out, U.S. contracts must go to American firms. But provisions of the law have been waived to allow foreign firms to bid, particularly for subcontracts.

"For competitive bids" on profit-making contracts, U.S. law says they must go to American companies, he stressed.

Natsios said that he could waive part of the law "if the national security interests of the United States are at risk." In the last decade, he continued, "we have suspended it three times -- in the reconstruction of Bosnia, Afghanistan and Iraq.

He noted that a major road-building project in Afghanistan was subcontracted by a U.S. firm to a Turkish-Afghan company, which is actually doing the work. He added that several British firms are also working on U.S. projects in Afghanistan and in the Gulf.

Under U.S. law, Natsios pointed out, the American prime contractors are "responsible for understanding federal procurement rules, federal accounting standards, standards of the (USAID) inspector general and the General Accounting Office (of Congress)." Also, USAID needs companies that had security clearances.

He said that prime contracts for Iraq reconstruction were given for bids to a list of companies that had some USAID contracts in the past. These companies had a security clearance and knew the regulations and accounting systems. The group of firms includes the largest contractors and construction companies in the United States, he noted.

Seven of these firms bid on the engineering contract, he pointed out, but there are eight other contracts open for bid.

These firms, he said, were "quietly and discreetly" contacted in January, before the U.S. decided on military action. USAID, he said, used a provision in the law to cut the procurement process from six to two months. "We wanted to be ready as soon as the war concludes."

Given the scope and time requirements of the Iraqi contracts, Natsios said that USAID "expects that some 50 percent of the reconstruction program will be done through subcontracts," and "those subcontracts are open to any country, anywhere in the world who can competently do the work and bids on it," he stressed.

In seeking subcontractors, Natsios observed, the prime contractor is interested in the "lowest price for the best value" and can meet the standards of the contract. The prime contractor handles the bids for subcontractors.

This percentage could vary, he told questioners at the Foreign Press Center. The estimated U.S. reconstruction package for Iraq is 1.9 billion dollars. He reminded a questioner that none of these funds come from seized Iraqi assets. They are from U.S. taxpayer funds.

He noted that other donor countries for Iraq also restrict government contracts to their own companies. Natsios said he hopes these countries will open their subcontracting to foreign firms.

Most of the U.S. reconstruction money is not for war damages, Natsios said, but for rebuilding Iraq's infrastructure, including schools, health, sanitation and water-treatment facilities that have been neglected by a regime which has spend its money on rearming.

He noted that U.S. forces are targeting military facilities in Iraq and are avoiding civilian infrastructure "because we are aware that we will be involved in rebuilding" that nation.

Concerning the Iraqi port of Um Qasr, now under coalition control, he said that a USAID assessment team has surveyed the port and found it in "very good " physical condition.

He said the dockside cranes are in good condition, and there are very large, empty warehouses that can be used for relief supplies.

A British ship, Sir Galahad, loaded with 232 metric tons of emergency food, water, medical supplies and blankets is now ready to unload in the port as soon as the mine sweeping is completed, he reported.

Also, he said the government of Kuwait has begun moving relief supplies across the border into Iraq.

The Japanese government, the administrator continued, announced March 26 that it would contribute $112.5 million for emergency humanitarian relief and reconstruction in Iraq.

Discussing U.S. relief efforts for Iraq, Natsios said that the United States will send 610 thousand metric tons of food for Iraq. Some of this has been purchased and is en route to Iraq, he said. President Bush's supplemental budget calls for $200 million for the World Food Program to purchase food in the region for Iraq.

"For the immediate humanitarian requirements" of Iraq, the international aid community is moving into "high gear now," he said.

Noting that he has been in discussions with Iraqi expatriates about the focus of the reconstruction, Natsios said that "Iraq belongs to the Iraqi people, and the Iraqi people have to be involved in the reconstruction of the country."

He said the United States will do a lot of its reconstruction at the "grass roots" level. It will involve village and neighborhood leaders, as well as citizens who have to make the decisions themselves. At a local level, Iraqi citizens will be making decisions on whether a health facility should be restored or if the priority should go towards a school, road or water system.

This process of local decision-making, he emphasized, is the beginning of the democratic process in that nation with people "voting, debating, disagreeing and discussing the future of their community."

Questioned about the role of the United Nations in the reconstruction effort, Natsios said it is expected the organization will have a role. "But there is not one single model for the U.N. involvement in the aftermath of a war or civil war."

In some cases -- as in East Timor -- the United Nations ran the whole country and in other cases, the U.N. plays a coordination role, he said. The international organization has not reached a decision on which model is appropriate for Iraq.

(The Washington File is a product of the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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