Speaking this week, Andrew Natsios, director of USAID, stressed that he could not open major contracts to foreign companies. He said that US guidelines maintain that only American firms can win prime contracts funded by the US government.
However, Natsios said he could exercise waivers on guidelines governing subcontracts, and he promised that British and other foreign firms would be offered this work. A USAID spokesperson said later that up to half of the subcontracts would go to non-American firms.
Natsios' concession came after a telephone conversation between Natsios and British trade secretary Patricia Hewitt last Tuesday. Hewitt is understood to have argued that the experience of UK businesses in Iraq and the scale of British military involvement in the conflict meant that British firms ought not to be sidelined.
Prior to Natsios' statement, US government officials had tried to head off complaints from foreign companies by promising that they would be allowed to serve as subcontractors on an initial $900m (£570m) batch of "emergency" contracts.
The spokesperson said: "So far we have let eight major contracts involving work on infrastructure, roads and seaport administration. After an assessment phase, we will lay out specific guidelines for any UK firms that want to get involved."
It emerged last week that the prime contracts for the $900m aid programme would go to US engineering and construction firms, including Bechtel, Fluor and Parsons Brinckerhoff.
n The UK government's Department for International Development this week ruled out the possibility that it would relax its rules forbidding the use of humanitarian aid funding for the rebuilding of Iraq.
A DFID spokesperson said: "There will be money earmarked for reconstruction, but we will be channelling any funds through the UN and other aid agencies. Any specific construction contracts will be open to tender in the normal way – to British and foreign companies alike."
The spokesperson added: "We have argued for a long time that our policy of untied aid is by far the most appropriate way of providing it, and DFID will be sticking to these procedures in Iraq."