Bechtel Corp.
Iraqi engineers in control room of a powerplant south of Baghdad.

The Special Inspector General for Iraq Reconstruction offered a mixed review of 24 projects carried out under a $1.3–billion contract with San Francisco–based Bechtel Corp. In a July 24 audit of Bechtel's spending under its phase II reconstruction contract, SIGIR noted that while the contract accomplished a substantial amount of work–particularly in the electricity, water and sanitation sectors–ten projects fell short of achieving original objectives.

"For a variety of reasons–either through government adjustments of scope or cancellations–a number of the task orders didn't get completed," says Stuart Bowen, Special Inspector General for Iraq.

Work at a water treatment plant in Sadr City, originally budgeted at $14 million, rang up $29.4 million in costs at 88 percent completion. It was transferred to the U.S. Army Corps of Engineers, which finished the job. Bechtel officials say the plant's scope was changed considerably, including tripling its capacity. The project is one of two Bechtel projects, out of 99 under contract, that were not completed, according to the company.

Among the projects that were completed as planned, some saw significant cost increases. The Baghdad South New Generation plant, which was originally budgeted at $31 million, tallied $173.5 million after seven contract amendments. Bechtel claims the project, which began under its phase I contract, was not clearly defined until after phase I work was completed.

Bill Shoaf, program director for Bechtel's work in Iraq, said that as facts on the ground and customer directives changed, the company shifted its work accordingly.

"Iraq was no different than any contract in that respect–the customer has the right to change and the contractor has the obligation to perform," he said.

U.S. Agency for International Development, which awarded the contract, objected to SIGIR's focus on "original objectives" as a measure of success. USAID stated in a July 20 letter released with the report that it "gives a distorted view of the overall success of the Bechtel contract."

Related Links:
  • Office of the Special Investigator's Review of Bechtel's Spending Under Its Phase II Iraq Reconstruction Contract,
  • USAID Awards Iraq Reconstruction Contract to Bechtel,
  • Bechtel Bows Out of Iraq Oil-Repair Contract Competition, Citing Scope Changes,
  • Bechtel Sends More Personnel, Supplies to Iraq,
  • Multimedia:

    Bechtel Talks: Lessons Learned in Iraq

    "USAID views the success of the job orders in the context of their objectives as amended through the job order amendment process," according to the USAID statement.

    The report was also critical of Bechtel's accounting of $250 million in miscellaneous expenses, which included subcontracts with Parsons and others. SIGIR asked Bechtel officials if it could provide more details, but were told it would take "considerable review" of cost data. As a result, SIGIR didn't pursue more detail.

    Shoaf said the company did provide that data and noted that the report said Bechtel provided "voluminous" information to USAID on a continuing basis about project costs. The Defense Contracts Audit Agency questioned only about 0.02 percent of total spending under the Phase II contract, he said.

    "We were very transparent," he said.

    Escalating costs may present an unexpected obstacle to the scheduled spring 2008 start of construction on the 23-mile extension of Washington, DC's Metrorail system to Dulles International Airport. According to a new report by the U.S. Department of Transportation's inspector general, the cost of project's 11.6-mile first phase--currently estimated at $2.7 billion--has nearly doubled since December 2004. The rise threatens to push the public-private project beyond cost-effectiveness criteria necessary to receive $900 million in federal funding under the Federal Transit Administration's New Starts program.
    The extension is a collaboration of the Commonwealth of Virginia, the Metropolitan Washington Airports Authority, and Dulles Transit Partners (DTP), which co-owned by Bechtel Infrastructure, Inc. and Washington Group International. The report speculates that the cost increase may be due in
    part to a lack of competition for the design/build contract, which was awarded under a Virginia law that permits negotiations with a single bidder for large-scale transportation projects.  In addition to the FTA grant, the extension is to be funded by a $375-million loan, revenue from the adjacent Dulles Toll Road, and other local sources.