updated 1/7/2004 8:20:18 AM ET 2004-01-07T13:20:18

The U.S. Agency for International Development Tuesday announced it had awarded a second lucrative contract to rebuild Iraq's infrastructure to engineering company Bechtel, this one worth $1.8 billion.

The contract will fund projects over the next two years in Iraq ranging from repairing power facilities, water and sanitation systems, to the continued rehabilitation of airport facilities and additional work at the seaport of Umm Qasr.

The contract follows a deal the privately held, San Francisco-based Bechtel signed with USAID last April to rebuild Iraq's shattered infrastructure. So far that contract has clocked up about $1 billion and will run until December.

For the most recent contract, the company said it had teamed up with Parsons Corp. of Pasadena, Calif., as well as Horne Engineering Services of Fairfax, Virginia.

Democrats have criticized USAID for awarding such a huge chunk of reconstruction work to Bechtel, which has ties to prominent Republicans like former Secretary of State George Shultz, who serves on the company's board.

USAID procurement director Tim Beans told reporters the contract was awarded in full and open competition with no outside interference. He said three companies had bid for the work.

"The key is that we have to get the best deal for the taxpayer," Beans said, adding that Bechtel had the highest technical score and provided the lowest cost.

'Outrageous claims'
USAID administrator Andrew Natsios said some "outrageous" claims had been made about the award of contracts by his agency, adding he had told staff he would act immediately if there was any "tampering" in the procurement process.

Outlining details of the deal, Beans said about $1 billion would go to the power sector, which is one of the crucial components for stabilizing Iraq and rebuilding its economy.

About $210 million would be spent on water and sanitation, while $109 million will go into improving surface transportation, according to USAID.

Bechtel would likely appoint several subcontractors and Natsios said he anticipated there would be strong Iraqi involvement on the ground.

Countries whose companies were eligible to bid on subcontracts would include Iraq, United States and all other countries except those excluded by U.S. procurement laws, such as Iran and North Korea.

USAID officials declined to discuss the profit margins for Bechtel, but said the maximum profits for such deals typically could not exceed 10 percent of the total contract value.

Bechtel issued a statement saying it was "honored" to be selected to do the work.

"This award, made after an open, competitive process, demonstrates our customer's confidence in our team's capacity and commitment to quickly begin Iraq Infrastructure II work, while at the same time continuing work under our initial Iraq reconstruction contract," said Bechtel national president Tom Hash.

He said the company intended to hire as many Iraqi employees as possible and would include small businesses.

The $1.8 billion comes from $18.6 billion in reconstruction funding appropriated by Congress last year for Iraq.

Bidding for about $5 billion worth of construction projects is expected to begin either later Tuesday or Wednesday when the Pentagon-run Program Management Office releases proposals for work.

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