The team of Bechtel National Inc. and Parsons Corp. won the deal for major reconstruction projects in Iraq, said Gordon West of the State Department's US Agency for International Development (AID) on Tuesday.
The two California firms will be responsible for rebuilding Iraq's electricity and water systems, as well as roads and schools, he said.
But Pentagon and State Department officials acknowledged they had not worked out a bureaucratic squabble over which agency would ultimately oversee more than $18 billion in reconstruction funding approved by Congress last fall.
The Bush administration also announced plans to open bidding on an additional $5 billion in Iraq reconstruction work.
No bid contracts
Bechtel already has a similar reconstruction contract with USAID, which could be worth up to $680 million by the end of next year. That contract, unlike the latest one, was not awarded through competitive bidding.
Bechtel executives gave thousands of dollars to President George Bush's 2000 campaign, and two of the company's top executives serve on advisory boards for the White House and Pentagon.
Democrats have criticised Bechtel's no-bid contract, calling it an example of Bush administration cronyism. But administration officials insist politics has had nothing to do with decisions to award contracts.
Iraqi families are using lanterns
during frequent power outages
Parsons has an $89 million contract with the US military to oversee disposal of Iraqi munitions at three sites. The company also has teamed with Bechtel to build facilities for the Army to dispose of large portions of the US chemical weapons arsenal.
Last September, Parsons announced it had hired two former top Energy Department officials to help the company land Energy Department contracts.
Parsons also hired a recently retired Air Force major general to work in its defence contracts operation.
Retired Navy Adm. David Nash, who oversees reconstruction contracts for the US-led Coalition Provisional Authority, which reports to the Pentagon, also announced plans on Tuesday to start the bidding process for an additional 17 Iraq reconstruction contracts worth $5 billion. Nash said he hoped to have those awarded by early March.
Bidding on the $5 billion in projects had been delayed for more than a month while administration officials reviewed how to structure them.
"We work for Jerry Bremer. AID in Iraq works for Jerry Bremer... He makes the decisions. He gives the orders"
For example, because the United States has decided to turn over sovereignty to Iraqis by this summer, plans to spend $100 million on developing democracy in Iraq shifted to plans for $400 million in such spending, said an administration official, speaking on condition of anonymity.
"We wanted to make sure things are correct before we go forward, because this is a lot of money," Nash said.
Pentagon, USDAID dispute
Part of the review involved a dispute between the Pentagon and USAID-which is part of the State Department-over which agency would ultimately oversee Iraqi reconstruction contracts.
That has not been resolved, said Pentagon spokesman Lawrence Di Rita on Tuesday.
USAID Administrator Andrew Natsios said he had had cordial discussions of the issue with US occupying administrator for Iraq Paul Bremer.
"Are there disagreements over details? Yes, there are, but I have to tell you, I think sometimes they are a little exaggerated, frankly," Natsios said. "There has not been very much disagreement with him (Bremer) on any of this stuff.
"We work for Jerry Bremer. AID in Iraq works for Jerry Bremer," Natsios said. "He makes the decisions. He gives the orders."
Nash said the CPA was holding $4.6 billion of the $18.6 billion appropriated by Congress for future Iraqi reconstruction work. Di Rita said that was to give the United States flexibility to deal with unforeseen developments.
"You can't spend $18.6 billion in six months anyway," Di Rita said.
The United States is continuing its ban on bids by companies from nations that opposed the Iraq war, Di Rita said. The ban had angered allies such as France, Germany and Canada whose firms were cut out from the competition.