In a policy document released in Washington on Tuesday, US Deputy Defence Secretary Paul Wolfowitz said he was limiting competition for 26 reconstruction contracts worth up to $18.6 billion that will be advertised in coming days.
"It is necessary for the protection of the essential security interests of the United States to limit competition for the prime contracts of these procurements to companies from the United States, Iraq, coalition partners and force contributing nations," Wolfowitz said in a notice published on the web site www.rebuilding-iraq.net.
The move is likely to anger France and Germany and other traditional allies in NATO and the UN Security Council who are being blocked out of prime contracts after their opposition to the invasion. They may bid for sub-contracts.
But the decision will placate countries such as Britain, Italy and Spain, which provided troops to Iraq but whose companies were excluded from the first round of deals that went to US firms.
The contracts cover electricity, communications, public buildings, transportation, public works, security and justice. Additional contracts are also being awarded to oversee those projects.
US trade lawyer Clark McFadden questioned the administration's criterion for the contracts. "Is this going to set a precedent where national security can be used to justify limiting competition?" he asked.
"This kind of decision just begs for retaliation and a tit-for-tat response from countries"
Prof Steven Schooner,
procurement specialist, George Washington University
Procurement specialist Prof Steven Schooner from George Washington University said it was "disingenuous" to use national security as an excuse and predicted an angry reaction from those nations excluded.
"This kind of decision just begs for retaliation and a tit-for-tat response from countries (such as Germany, France and Russia)," said Schooner.
But a defence official said NATO partners had known for weeks they would not get prime Iraq business. "This is not a slight. We still have many agreements with those countries and good working relationships with them."
Wolfowitz is hoping that excluded companies will put pressure on their governments to join the post-war effort.
"Limiting competition for prime contracts will encourage the expansion of international cooperation in Iraq and in future efforts," wrote Wolfowitz.
The document dated 5 December listed more than 60 countries eligible for contracts funded by the $18.6 billion appropriated by Congress to rebuild Iraq.
The list included Britain, Australia, Poland, Japan, Italy, Norway, Spain, Turkey, Jordan, Egypt, South Korea, the Philippines, Romania and Saudi Arabia.