Global Policy Forum

Pentagon Warns British Firms


By David Gow

March 27, 2004

The Pentagon yesterday warned British firms winning contracts under its $18.4bn (£10bn) Iraqi reconstruction programme that they would be thrown out if they failed to give a minimum 10% of the work to US small businesses. Mark Lumer, assistant deputy secretary of the US army, said there could be grounds for default if prime contractors failed to meet that criterion. Ideally, the US would like 23% of sub-contracting work handed to American businesses.

"We will be enforcing the terms and clauses of these contracts very strictly," he told a London seminar on federal acquisition rules (FAR) organised by UK Trade & Investment, the government agency. Mr Lumer and David Nash, the retired US rear admiral running the coalition provisional authority's programme management office (PMO), in Baghdad, said all firms operating in Iraq would have to train Iraqis and offer them senior positions. Their comments came as Parsons, a Pasadena-based company, confirmed it had won a $500m contract for the construction and renovation of public buildings in Iraq.

With one $750m contract for security and justice work left to be awarded, Mr Nash said $10bn of construction and related work would have been let by July 1 - the day a provisional Iraqi government takes over from the CPA run by Paul Bremer. Insisting that the selection process was transparent and fair, Mr Nash said UK firms, including Amec, Foster Wheeler and Serco, had so far won $1.6bn of orders - although Parsons alone has won a share of $4.6bn of work.

Urged by Mike O'Brien, trade and investment minister, to register for sub-contracting work, British firms were told they could bid to supply products ranging from coastguard vessels to road signs, hospital equipment to measures to protect witnesses in the run-up to "trials of certain unnamed people", according to Mr Lumer. But participants, including expatriate Iraqi executives, said the reality was different from the US rhetoric, with firms facing 20% of costs in providing security and unable to meet the FAR, which are set out in 10,000 pages.

John Payne, chief executive of construction company TCI, said the bulk of the work in Iraq had been funnelled through Lebanese middle-men to Jordanian and Saudi companies. "By the time it gets back there's nothing left for British or Iraqi firms." Mr Nash, who said $4bn of the three-year Pentagon programme had been kept in reserve, insisted that Iraqi firms would be given a fair slice. "Employment will grow in leaps and bounds."

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