By Nicholas F. Benton

A scathing letter from two ranking minority members of Congress lashed out against the Bush administration's "irresponsible" policy of "doling out monopolies" to pet contractors for reconstruction projects in Iraq at a huge expense to U.S. taxpayers.

The seven-page Dec. 18 letter from Reps. Henry Waxman and John Dingell denounced in the strongest possible terms the non-competitive policy for letting contracts of the Bush administration's Iraq Program Management Office. It includes a repudiation of the Bush policy permitting only U.S. "coalition allies" in Iraq to participate in the reconstruction effort there.

The administration's approach is "irresponsible" and "fundamentally flawed," the letter contends. "Companies will be granted massive monopolies without even having to go through full and open competition to obtain them. Numerous potential contractors will be excluded from what competition there is based on their nationality alone. There will be inadequate government oversight of these abuse-prone, cost-plus contracts. Without the discipline of either price competition or rigorous oversight, there is little to protect the taxpayer from inflated prices or poor performance," it declares.

"Rather than creating opportunities for true price competition, the administration intends to award individual contractors monopolies over different sectors of the Iraqi economy...without full and open competition, limiting the opportunity to submit bids to a few hand-picked companies for each contract," it notes. "Other problems are the decision to exclude companies from certain countries from the competition, the decision to continue to rely on abuse-prone cost-plus contracts, the decision to contract out the job of overseeing the contracts to yet additional contractors, and the inadequacy of the administration oversight of these contracts."

All of this adds up to sweetheart deals with favored contractors that will wind up costing U.S. taxpayers countless more dollars than necessary. "In effect, the administration is giving contractors a virtual blank check," Waxman and Dingle charge.

Moreover, they contend, the policy is in violation of the Iraq supplemental appropriation bill that passed Congress Nov. 3 making the money available for these projects. Contracts must be awarded through "full and open competition," the language of the bill read.

While the administration alleges it will control costs by oversight mechanisms, the plan for achieving this is a joke, as the letter's authors point out. There will be only 120 employees on the ground in Iraq to oversee $18.7 billion on contracts. "This is woefully inadequate," they write. "The Army Corps of Engineers, in contrast, has 30,000 employees to administer $14 billion in projects."

In addition to giant oil infrastructure and capital construction contracts already handed over to Bush cronies Halliburton and Bechtel, the Bush plan calls for another 18 giant construction monopolies over different sectors of the Iraqi economy. The selected companies will have monopolies over all public works projects in their respective zones. "Like Bechtel and Halliburton, several large corporations will receive massive contracts worth billions of dollars without ever having to demonstrate an ability to complete specific projects at lower cost than other companies. This may be a good arrangement for the contractors, but it's not a good deal for taxpayers," say Waxman and Dingle. "Taxpayers will pay a high price for this imprudent approach."

The new contracts will be of the "Indefinite Delivery/Indefinite Quantity" (IDIQ) type, meaning the total amount of work and specific projects to be completed are unknown at the time of the bid and award. They are "cost-plus" contracts, meaning the government reimburses the contractor for the actual cost and then pays an additional fee. There is little incentive for the contractor to keep down costs because costs are completely reimbursed.

As far as limiting foreign participation to "coalition partners," Waxman and Dingle note that not only will this drive up the cost of contracts by excluding some more qualified and cost-effective contractors, but it is also arbitrary. They note that Turkish firms can compete even though Turkey refused to allow U.S. aircraft to use its airspace or U.S. ground forces to stage on its soil. On the other hand, German and Canadian companies cannot compete even though the German government permitted the U.S. to use air bases on its soil during the invasion and Canada has pledged $300 million to the humanitarian and reconstruction effort in Iraq. "This just doesn't make sense," they contend.

(To contact this author: email nfbenton@fcnp.com)