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Army terminates Iraq contract with a firm tied to Chalabi

WASHINGTON—The Army announced late Friday that it had terminated a $327 million contract with a Virginia-based firm to supply weapons and other equipment to the new Iraqi army.

The contract was to supply four battalions of the new Iraqi army with rifles, uniforms and other equipment. But it was put on hold last month after six of the 17 losing firms protested that the winning bid as unrealistically low.

The contract was also called into question because the president of Nour USA, the winning firm, is a close friend of Ahmad Chalabi, a member of Iraq's Governing Council and a favorite of Bush administration conservatives. Chalabi's exile group, the Iraqi National Congress, provided crucial intelligence and other information that the administration used to build its case for invading Iraq.

A senior Army official said Friday that the contract was terminated after a review of the bids concluded that the Army's statement of work for the contract was "ambiguous" and that some of the bids were as much as $700 million apart.

"That was a pretty clear indication that the industry did not have a good understanding of the procurement," said the official, who spoke on condition of anonymity.

The contract was issued by the ruling Coalition Provisional Authority in Baghdad in January. The senior Army official said that responsibility for bidding on the new contract would be shifted to Army Materiel Command, headquartered in Alexandria, Va.

On its Web site, Nour USA is described as an "international investment and development company" with more than 100 employees based in Iraq for reconstruction and development work.

It lists its areas of expertise as telecommunications, agribusiness, Internet development, recruitment, construction materials, oil and power services, pharmaceuticals and fashion apparel.

Nour USA was formed last May and has no experience providing military equipment or hardware.

According to previously published reports, Nour planned to subcontract its weapons procurement from the Polish firm of Ostrowski Arms, but that firm doesn't have a license to export weapons, reports said.

One of the firms protesting Nour's winning bid was the Bumar Group, Poland's state-owned arms manufacturer. When Nour's winning bid was announced in January, the decision caused an uproar in Poland, which has contributed roughly 3,000 troops to Iraq and leads the 10,000-strong multinational division in southern Iraq. The prospect of winning lucrative reconstruction contracts was one of the approaches Poland's government used to win public support for contributing troops.

The Bumar Group, Jordanian firm Cemex Global, U.S. defense industry giant Raytheon and several other companies were among the losing firms that protested the bid.

Officials with Nour USA weren't available for comment late Friday.

The Army official said that the decision to terminate the contract was "in no way a reflection on Nour's capabilities," but that it was done for the convenience of the Army. The official said that political considerations, including ties between Nour President A. Huda Farouki and Chalabi had nothing to do with the issuance of the original contract or its termination.

"This is strictly for government convenience," the official said, adding, "there was no political role in this whatsoever."

The official said the Army's Materiel Command would re-issue the bid in the coming weeks and that all of the original bidders would be notified.

Bids for the original contract were solicited in November 2003, and work was set to begin this month, with completion in February 2005. In the meantime, the official said, "alternate contract vehicles" and "other options" would be used to expedite procurement of weapons and military equipment for Iraq's new army.


(c) 2004, Knight Ridder/Tribune Information Services.