Contrack International, one of the largest U.S. contractors in Iraq, has
announced it is withdrawing from the reconstruction effort. The company cited "skyrocketing security costs" as the basis for withdrawal.
Contrack's is the largest to be canceled to date, U.S. officials said. The move has led to fears that Iraq's mounting violence could prompt other firms to consider pulling out, or discourage them from seeking work in Iraq, further crippling reconstruction.
But, never fear:
U.S. reconstruction officials said the termination of Contrack's contract, which was not previously disclosed, would not hamper rebuilding. They said they were planning to put the contract up for rebidding, a process that could take months, and were hopeful that Iraqi firms would participate.
And:
"Even though the situation is difficult, even though the security environment is not what we'd like it to be, progress is being made," Charles Hess, director of the reconstruction office, said at the conference.
Phew! For a second there, it sounded like things weren't going well over there.
More details below.
Contrack's $325 million contract was "supposed to construct new roads, bridges and transportation terminals in Iraq." However, "[i]t wound up only refurbishing a handful of train depots."
The problems encountered by the company included:
- "Small-arms and mortar fire became common at construction sites."
- "Gunmen attacked the joint venture's headquarters about 2 1/2 months ago."
- "Earlier this year, an Egyptian driver working for the firm was kidnapped. His body was found 12 days later, dumped outside one of the company's construction sites with five bullet holes in the head. A note found on his body said 'collaborator.'"
- "At one site, for instance, the sole supplier of gravel shut his quarry after receiving threats from insurgents about cooperating with Americans."
Due to the intensifying insurgency, "the security expenses for simple tasks such as fixing potholes soared to 60% of the cost of the project."
Here are a few thoughts:
- When a major U.S. company leaves $325 million on the table because of security risks, something is wrong. Companies do not like to do that. Note that it appears, at least, that there was no effort to renegotiate the deal to account for heightened security costs. (Or, if there were such efforts, the government wouldn't pony up enough to compensate the company.)
- Now there's more money for Halliburton!
- This notion that Iraqi firms will step in and take up the slack seems absurd. If they do, I wonder if it will be at absolute cut-rates, with laborers making slave wages simply because their feeble economy leaves them no choice.