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British industry upset over rules limiting role in post-war Iraq

LONDON—British government officials and business leaders fear that Washington wants to deny them lucrative reconstruction contracts in post-war Iraq despite Britain's unrivaled contributions to fighting the war.

U.S. government purchasing laws are the rub. They stipulate that only American companies can be prime contractors for the U.S. Agency for International Development, which is to oversee reconstruction in Iraq.

British Prime Minister Tony Blair's government, which has contributed 45,000 military personnel to the Iraqi campaign despite vocal public and political opposition, has quietly appealed the U.S. rule. British industry is more vocally upset and wants some U.S.-financed reconstruction business steered its way.

Trade and Industry Secretary Patricia Hewitt last week lobbied AID administrator Andrew Natsios, but neither Natsios nor Hewitt would discuss the outcome. An AID official suggested that British concerns are overblown because the agency has promised waivers to allow foreign companies to bid as subcontractors.

Hewitt's appeal followed the circulation of a letter in Britain by top executives in the oil, gas and water industries expressing concern that, as in the 1991 rebuilding of Kuwait, U.S. companies will get the lion's share of reconstruction work.

"She was highlighting the fact that UK companies have a lot of experience in reconstruction," said an official with Trade Partners UK, an agency that answers to Britain's foreign secretary and the trade ministry. "What we are looking at is having UK companies get involved with this work as a subcontractor."

The Trade Partners official, who asked not to be identified, said Britain opens its foreign aid projects to international bidding.

The Bush administration was deep into reconstruction planning months before the first shot was fired in Iraq. In February, AID solicited bids from U.S. contractors for seaport and airport administration, public health, education, local governance and the biggest prize: capital construction. The last category includes rebuilding Iraq's roads, bridges, airports, power plants and other public works, and it accounts for $600 million of the $900 million in AID's first round of Iraq contracts.

Capital construction contract winners are to be announced this week, said Ellen Yount, an AID spokeswoman.

Britain's P&O Ports, which operates terminals and ports in 17 countries, said Monday that it has been notified it won't be eligible for an AID prime contract to operate the Iraqi port of Umm Qasr. P&O spokesman Peter Smith said in an interview that his company was disappointed because it's qualified for the job. He said decisions should be made "according to the skills available and the expertise that companies have to offer."

Yount with the AID said federal procurement laws require that prime contractors be U.S. companies and that Iraq's reconstruction, especially in its initial stages, will require U.S. security clearances of contractors given access to classified documents.

AID administrator Natsios promised several weeks ago, Yount said, that U.S. prime contractors would be permitted to hire foreign subcontractors under AID waivers. She said AID prime contractors are using some foreign subcontractors in Afghanistan's reconstruction.

The first round of contracts, Yount added, "doesn't represent the full universe of reconstruction work, and 50 percent of all work will be done by subcontractors."

Colin Adams, the head of the British Consultants and Construction Bureau, said Monday that he was unaware of AID's willingness to sign waivers to permit foreign companies to work as subcontractors. His bureau represents many of Britain's biggest engineering and construction firms.

"They hadn't made that waiver clear to UK companies," Adams said. "We didn't have a clear direction from your government to ours."


(c) 2003, Knight Ridder/Tribune Information Services.