July 26, 2004
AID

Western Ways Force Iraq to Trim Water Projects

By JAMES GLANZ

New York Times

BAGHDAD, Iraq, July 25 - Rising security and other overhead costs of Western contractors are cutting into the billions of dollars set aside for some 90 planned water projects, allowing them to supply only half the potable water originally expected, Iraqi officials say.

Scaling back the projects by that much would vastly reduce the benefits for the citizens of a country that already meets no more than 60 to 80 percent of the demand for water on a given day, depending on the region. The Iraqi government estimates may also have wider repercussions, because they provide the first concrete measure of how the continuing violence in Iraq could affect the $18.4 billion reconstruction program approved by Congress last fall.

That program covers numerous infrastructure areas, including transportation, oil, electricity, sewage - and of course water, the sector covered by the Iraqi estimates. Over all, about $4.3 billion was set aside for water and public works, of which about $2.8 billion has been released so far.

"A big chunk of that money is going to administration and security," said Nesreen Berwari, the minister of municipalities and public works, the sector of the Iraqi government that has responsibility for water projects outside Baghdad.

"Everything we planned for, because of the budget limitations, what's available for construction is half," Ms. Berwari said.

Steve Susens, a spokesman for the Project and Contracting Office, which is affiliated with both the Defense Department and the United States Embassy in Baghdad, said estimates for security costs and other overhead had risen somewhat since the first estimates on the size of the projects were made early this year, before the insurgency erupted. But he said the office and its contractors were seeking innovative ways of softening the impact of the rising costs, like seeking new donors or reworking the engineering designs.

"There's no reason to dispute the figures," Mr. Susens said of the Iraqi calculations. He added that "security costs are the one thing we can't control. It's controlled by the enemy."

Another official at the contracting office, who spoke on condition of anonymity, said that the overall scope of the work was beyond what Iraqi companies, which would have far lower overhead costs but have little experience with billion-dollar projects, could handle - even though much of the construction work will actually be carried out by Iraqi subcontractors chosen by the Western companies.

"If you compare it to what they've done in the past - in the past 20-some years - it exceeds anything they've done," the official said.

The official also said some of the original Iraqi estimates might have been based on optimistic assumptions about what the American money could buy and that they did not take into account potential measures like combining several projects that are close to one another in order to save money and increase capacity.

But Keith Ashdown, who as vice president for planning at Taxpayers for Common Sense in Washington has studied contracting in Iraq, said it was "shocking in the extreme that we're basically cutting our efforts on these projects because of administrative and security costs."

"We're going to get more bang for our buck in project performance when we get Iraqis doing the work - not just subcontracting the work but actually managing the work themselves," Mr. Ashdown said.

The projected reduction was described by officials in the Ministry of Municipalities and Public Works, who based their estimates on detailed calculations for four major projects totaling about $234 million.

The Iraqi officials said that delays, often unexplained by the Americans and lasting as long as six months, had kept many of the approximately 90 new projects from moving much beyond the planning stage. Those four - in the northern cities of Halabja, Erbil and Baquba and the southern city of Nasiriya - are among the furthest along in their design.

Halabja is infamous as the Kurdish town that Saddam Hussein's government gassed in 1988, killing thousands. Erbil is a historic town that is also in Kurdish territory, while Baquba is a city just north of Baghdad that has been continually racked by violence. Nasiriya has suffered only minor disturbances since the American-led invasion last year.

Iraqi engineers had originally estimated that those four projects alone would provide about 235 million gallons of potable water a day for about 1.7 million people. But after security and other costs for the Western companies were factored in, the number of gallons they could be expected to supply dropped to about 118 million a day.

An official in the Ministry of Municipalities and Public Works who is intimately familiar with the numbers confirmed that most of the extra costs come about because the prime contractors are Western. Western companies typically hire large numbers of private security guards, set up elaborate base camps and travel only in heavily guarded convoys, offer much higher salaries than Iraqi companies, pay skyrocketing insurance premiums and require much more administrative support in order to comply with stringent American regulations.

Together, those items averaged 25 percent of the entire contract, the official said. But as with most construction projects that require capital-intensive items - in this case, miles of soft iron pipe, expensive pumps and other hardware - the cuts will have a disproportionate effect, reducing the ultimate capacity by half.

There has also been talk of eliminating some projects in order to pay for others, but the ministry has resisted such suggestions, saying that all of the work is critical in a nation suffering from water shortages. Ministry officials say that American officials have also pressed to scale back projects on the argument that they could be designed to cover short-term needs in certain parts of the country, and be expanded in the future when more money is available.

The normal procedure for such expensive projects is to design them to cover needs for the next two to three decades, said Mahmood A. Ahmed, the ministry's director general for water. But he said that in the Western companies' estimates of the costs, "there is a security part; this is very sensitive for them."

Mr. Ahmed expressed gratitude that the United States was spending so much money in the first place and said that even if the projects have to be cut by half, "it's better than nothing for now."

But Mr. Ahmed also described an American reconstruction program in the throes of lengthy delays. He said that after early estimates for the projects were made last February, the ministry was forced to wait for months while the Americans ground through their contracting procedures.

"If you give us the money in the beginning of this year, in January or February, I think now we will be finished," Mr. Ahmed said.

Officials at the contracting office disputed that assertion, saying that the time was required to go through the normal process of assuring that American taxpayer money is being spent responsibly. Mr. Susens called the reconstruction an enormous task and called to mind the length of time it has taken to carry out the Big Dig in downtown Boston - except that there are some 2,300 different projects to carry out in Iraq.

"As far as construction projects," Mr. Susens said, "these are like lightning."

Many of the new water projects have been contracted to a joint venture of major American and British contractors and named Fluor-Amec. Other companies that have received major contracts in the general area of water resources are Washington International Group and Black and Veatch.

Mr. Ahmed leveled severe criticisms at Bechtel, a company that received some $500 million in earlier government contracts for water work through the United States Agency for International Development. Mr. Ahmed said that Bechtel failed to consult with the ministry in everything from its choice of Iraqi contractors to its decisions of when and how to undertake major repairs of water systems, especially in the parched south of the country.

As a result, Mr. Ahmed said, Bechtel has done business with shady contractors and is now in the middle of repair projects, reducing water supplies during the peak demand of summer - something he said Iraqi companies would know should be avoided.

"American companies, they don't know the criteria of projects in Iraq," Mr. Ahmed said.

But Greg Pruett, a spokesman for Bechtel, said that the company was being as flexible as it could in accommodating requests from the ministries in carrying out projects. He said that the company was constantly grappling with the security situation in Iraq, adding that "if that means that a project is not going to proceed as quickly as we would like it, then we're going to accept a slowing of the project to ensure the safety of our workers."

A press officer for the development agency, Steve Tupper, said that Iraqi companies did not generally have the ability to comply with American rules on accountability and transparency in the use of public funds.

Under pressure from the citizenry, Iraqi officials "want quick fixes," Mr. Tupper said.

"But quick fixes won't work," he said. "Without proper installation and regular maintenance you'll end up with the same deteriorating infrastructure that we started with."

Asked if he was concerned about the performance of the new contractors, Mr. Ahmed said, with a note of fatalism that is typical of Iraq: "It's out of our control. What can we do? But they will learn."