Iraq: Reconstruction Contracts (Hansard, 19 November 2003)

§ Lord Sainsbury of Turville
My Lords, the £18.6 billion additional spending to be used on the reconstruction of Iraq will be administered by a new organisation, the Iraq Infrastructure Reconstruction Office. There is no clear agreement on what procurement rules will apply, but it is likely that the office will follow those of the US Department of Defense, whose procurement rules are more flexible than those used by US AID, which by law must give prime contracts to US companies.
1937 The Minister for International Trade and Investment visited Washington on 3rd November to discuss with senior members of the administration the disbursement of the supplemental budget and the role that the British private sector might play.

§ Lord Razzall
My Lords, I thank Minister for that Answer. I assume, incidentally, that he made a slip of the tongue and that 18.5 billion dollars, not pounds, have been allocated.
Will the Minister say whether he regards it as acceptable that, of the top 10 contracts to be let so far, all of them have been granted to American companies? Many have been granted to companies that were former employers of members of the administration, including Vice-President Cheney. Many have been awarded to companies that gave substantial donations to President Bush's election campaign. Do Her Majesty's Government regard that as acceptable behaviour, or as behaviour that would make even Lloyd George look parsimonious?

§ Lord Sainsbury of Turville
My Lords, it is difficult to see what proportion of contracts has been awarded to different countries, because no comprehensive list has been made. For the contracts given by a whole range of bodies, including the Coalition Provisional Authority, US AID and the US Army Corps, the last figures that we have seen are very out of date—they date back to August. The figures produced by Bechtel suggest that British companies have got a very reasonable proportion of the total number of contracts.

§ Baroness Miller of Hendon
My Lords, what effect does the Minister believe that the demonstrations in London and around the country against the President of the United States of America may have on any decisions that are taken by the American administrator in Iraq on the very question that the noble Lord, Lord Razzall, has asked?

§ Lord Sainsbury of Turville
My Lords, Mr Paul Bremer made it clear in a recent interview that he would welcome more British contracts. British companies are looking for those contracts to be given fairly and properly. When the Minister for International Trade and Investment went to Washington, he was warmly received and encouraged to put forward more bids.

§ Lord Watson of Richmond
My Lords, does the Minister agree that, even under more flexible rules, the probability is that no contracts will be awarded other than to foreign companies in joint venture agreements with US companies? If that is the case, where does that leave possible British contractors? Just as importantly, as the Government today confirmed, unemployment in Iraq is at 50 per cent. What are the chances for Iraqi companies to play any part in the reconstruction of their own country?

§ Lord Sainsbury of Turville
My Lords, under Department of Defense procurement rules, foreign 1938 firms are eligible to bid on prime contracts, although there is a presumption of giving preference to US firms that are able to carry out the work. In practice, most UK companies are either looking to bid on prime contracts in joint ventures with US partners or to bid for sub-contracts.
Iraqi companies are playing a very large part in the process. I mentioned the last figures that we have on the Bechtel situation, which showed that a higher percentage of the contracts were going to Iraqi companies than to American companies.

§ Earl Ferrers
My Lords, can the Minister say who pays for the contracts? Presumably it is not the Iraqis. Is it only the Americans, or does it go further than that?

§ Lord Sainsbury of Turville
My Lords, the money that we are talking about in this case is provided by the American Government.

§ Lord Elton
My Lords, is there any requirement on those who get the contracts to see that some of the benefit, in the form of labour and jobs, goes to local people in Iraq, and that the whole benefit does not accrue to the United States?

§ Lord Sainsbury of Turville
My Lords, as I have pointed out, a large number of the companies involved are Iraqi companies, which in many cases have been chosen for just that reason—because they will be using labour in Iraq. Clearly, that is very important to the reconstruction efforts and to the attempts to get the economy going again. Furthermore, given that the work is by and large infrastructure work, a great deal of it must by definition take place in the country.

§ Lord Brookman
My Lords, many of us are concerned about the American situation regarding steel. Will my noble friend comment on where we are with the American Administration regarding steel? To what extent does it involve our commitment and position regarding the restructuring of Iraq?

§ Lord Sainsbury of Turville
My Lords, they are two quite separate situations. Our views are well known on steel. The matter has gone to the WTO, which has made it clear that the subsidies for the tariffs on American steel are illegal. It is for the EU to take further action in due course, but that is a separate situation from the Iraq situation.

§ Earl Attlee
My Lords, would it not have been more helpful to UK companies if before hostilities commenced DfID had been more closely involved in the planning of the reconstruction of Iraq?

§ Lord Sainsbury of Turville
My Lords, I think it is very difficult to see how that would have taken place in practice. Clearly, it would have been desirable if more 1939 planning had taken place. However, I do not think that the particular issue of how contracts are allocated would have been deeply affected by that.

§ The Earl of Sandwich
My Lords, what is the position with Turkey? Do the Administration have the same misgivings about its commercial operations as they do about its defence forces?

§ Lord Sainsbury of Turville
My Lords, I thought that this Question was on Iraq contracts. I cannot see any connection between that and the Turkish situation.

§ Lord Campbell-Savours
My Lords, if American money is funding these contracts, why should the Americans not favour their own contractors as prime contractors?

§ Lord Sainsbury of Turville
My Lords, as I said, a large amount of the money so far allocated has been allocated by US AID. One of its legal requirements is that the prime contracts go to American companies, which seems not unreasonable. On the other hand, in the award of other contracts and where there is open competition, I think it very important that that should be on a fair and open basis.