As the US administration in Iraq requests more money to pay for reconstruction, leading UK companies line up for a slice of the action
British construction workers could soon be heading for Iraq in large numbers. Brian Wilson, former construction minister, this week announced that British firms had won 18% of Bechtel's £430m infrastructure contract for Iraq. Britain's share of the contract equalled that of Saudi Arabia and was only bettered by the USA, which has been awarded 28% of the work.
The contract could signify a flood of work for British firms in Iraq. Engineering services group Amey will know in the next month whether it has won a £314.4m bid for two oilfield refurbishments. Amey is bidding for the work in a joint venture partnership with US firm Fluor.
Amey and other British companies should also benefit from the request from Iraq US administrator Paul Bremer for more money to restore power and water systems. He has asked the US Agency for International Development to give Bechtel an extra $350m to patch up the infrastructure on top of the $680m it received in another contract signed in April. The Iraq US administration says that sabotage and looting are the reasons behind the cost increase.
More extensive repairs to infrastructure, estimated by Bechtel to be $6bn, are expected to be undertaken by a new Iraqi government and paid for by oil revenue. Bremer says the production will be back up to pre-war levels by October 2004.
Bremer announced that the price of reconstruction was "almost impossible to exaggerate". The total figures are staggering. It is estimated that it will cost $2bn to meet current demand for electricity and $16bn to provide drinking water for all households in the next four years.
Many contracts are heading the way of Houston-based Halliburton. It has won $1.7bn of contracts through its subsidiary Kellogg, Brown & Root. The work includes $142m for Kuwait base-camp operations, $170m for logistical support for the Iraqi reconstruction and $28m for the construction of prisoner of war camps. It has also been awarded $700m for work on the Iraqi oil network. British firms look set to enjoy a healthy proportion of the subcontracted work: up to $300m if the share is similar to Bechtel's divvying up of its infrastructure contract.
Ironically the reconstruction of Iraq has dented Amey's profits this year. Money earmarked by the US government for environmental clear up work, some of which had been awarded to Amey, has been used to pay for the war effort in Iraq. But such losses should be more than compensated for by the amount of spending required to get Iraq back on its feet.
The big question is how contractors will ensure the security of its employees, and how it will persuade workers to move there in the first place. Clearly the reconstruction of Iraq will be one of the biggest challenges ever to face the building industry.