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| DANGEROUS BUSINESS | |
 April 22, 2004  | |
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Violence across Iraq has increased the security risks for private-sector companies working to rebuild the country. Ray Suarez discusses the challenges these contractors face with Stan Soloway of the Professional Services Council and Sheba Crocker from the Center for Strategic and International Studies.
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When General Electric and the German firms Siemens announced they'd suspended much of their operations in Iraq, they cited increasing security concerns. Before contractors head over to Iraq, they learn how to deal with the dangers they'll face at training session like this one. PATRICE MINGO: The first thing that comes out of the recruiter's mouth is, "You're going to Iraq. This is a hostile zone. You need to know that at this point we lost nine employees." THOMAS HAMILL: They attacked our convoy. RAY SUAREZ: A truck driver for Kellogg Brown & Root, Thomas Hamill, was one of them. He was captured by gunmen two weeks ago when his convoy came under attack. His fate is still unknown. As they load up their luggage to leave, some workers explained what motivates them to take these kinds of risks. SYLVIA STURSKA: Because it's a great opportunity. It's an opportunity to do something for the military. They've done so much and they need our help.
RAY SUAREZ: Security is such a concern that some 15,000 bodyguards for hire currently work in Iraq, guarding non-military coalition employees, including U.S. administrator Paul Bremer. |
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| Increasing danger in Iraq | ||||||||||||||||||||
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RAY SUAREZ: For a closer look at some of the challenges companies are facing in Iraq, I'm joined by Stan Soloway, president of the Professional Services Council, a trade group that represents many of the companies doing business in Iraq, including Halliburton and Northrop-Grumman. And Sheba Crocker, the co-director of the post-conflict reconstruction project at the Center for Strategic and International Studies. Stan Soloway, today, more than a year after the invasion, is it getting more difficult, more expensive and more dangerous to do the work of rebuilding Iraq?
That's what makes this an entirely unique environment from a contractor's perspective because it drives the numbers and it's a very large operation, the largest I think that we've ever seen of its kind. When you have situations such as occurred over the last few weeks, clearly in some areas the situation has gotten much more difficult. Some work has had to slow down. In other areas, frankly, it's continuing on a pace. RAY SUAREZ: Is it also unique, Sheba Crocker, that they're trying to do all the work that Stan Soloway just described while the place is still hot, not pacified?
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| Paying for rising security costs | ||||||||||||||||||||
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RAY SUAREZ: Well, who bares those costs that you mentioned going up? SHEBA CROCKER: Well, ultimately a number of different groups bare them. If the reconstruction is slowed down because of security problems, it's the Iraqi people who are bearing the cost, but from a financial perspective, it's actually the U.S. taxpayer that's bearing the cost because the cost for securing these companies, private security guards and other things they need, armored cars and the rest of it to protect employees in Iraq, actually come out of the reconstruction money that the U.S. government is paying to these contractors. RAY SUAREZ: Let's talk about how these contracts are structured. If a price is agreed to, to perform a certain task, if there are unforeseen increases in the cost of providing scrutiny, of insuring of people and equipment, are your member companies able to add that to the cost of the contract?
The security costs themselves that Sheba referenced can come in a number of ways. She referenced the reconstruction slowing down. There's also -- and this has been an ongoing case -- not slowed down or sped up -- and some construction sites, you may have 1,000 laborers coming in every day, it can take four or five hours to process them on the site through security. That takes away some of your productive labor time. They're a great work force when they're able to work but it's not their fault they have to go through security. RAY SUAREZ: Out of an eight-hour day... STAN SOLOWAY: In some cases you may end up with a four-hour productive work day, but you may be paying the people for more because they were at the gate at time, it's not their fault. That's not the fault of the company; it's not the fault of the Army. It's driven by the environment itself. So if the cost is determined to be fair and reasonable and Sheba is right, some of the costs are clearly going up, the security needs and insurance and so forth, then the government will cover it. If the government determines that it's not fair and reasonable price for what's being adjusted, then they won't. |
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| Filling contractor jobs in Iraq | ||||||||||||||||||||
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RAY SUAREZ: Well, what are some of the near-term impacts that you imagine we're going to see out of a couple of weeks like this one? Will it be harder, for instance, to locate people who want to go?
RAY SUAREZ: Are the way these things are contracted so interlocking that if a GE and a Siemens pull out or slow down or at least temporarily cease work that slows up other people? Anybody who has ever had a contractor in their house may think... STAN SOLOWAY: Some of them are interlocking. I think you have to be a little bit careful here. First of all, if you look at the Siemens situation, they're a German company. I don't know what the German government is telling their companies. That's the guiding force here is for U.S. companies with a GE slowdown or whatever they've done, a partial shutdown, it's probably driven by a security situation, probably recommended by the CPA or another authority in Iraq.
You have folks who are in the business of developmental assistance. They do a lot of work for USAID. USAID rightly takes great pride in completing the road from Baghdad to Kandahar despite the hostilities. These are people who take very seriously that role. This is what they do. They've been in hostile territory before. Many of these people may have worked in parts of Africa and the Middle East doing developmental work or military support. A lot of it has to do with the ethic and the spirit that they bring to the job. And then for some there's clearly an economic incentive. But, frankly, for most people, I don't think that the economics are going to outweigh the risks. And right now we're seeing the commitment to the job outweighing that risk concern. RAY SUAREZ: Well, right now, Sheba Crocker, you're seeing news releases from United States government sources talking about how everything is going full steam ahead and measured progress, this many miles of road and this many kilowatt hours of electricity. And you're hearing stories from truck drivers who got stoned and shot at every day, pulled out of their cabs and beaten up. Can both be true at the same time? Does it really depend on where you're looking from, from 30,000 feet at the whole country or from a road that you have to drive down? SHEBA CROCKER: I think both probably can be true at the same time, even though it seems a bit incongruous. I think in part, as Stan was saying earlier, it does depend on what part of the country you're in. And in certain parts of the country, I think a lot of these projects have been able to go forward with fewer problems. I don't think anywhere has been completely free of problems. But there are certainly places in the country where it has probably been easier to do things than in others. But, again, I think it gets back to the idea that these companies are just being asked to do work in a very hostile and violent environment in some cases. And so the work is ongoing. There are a number of dedicated people there. It's also important to remember that there are a number of Iraqi employees who are working for these companies, and in certain cases, even when the foreign employees may be stuck inside the Green Zone in Baghdad or in heavily fortified compounds, some work at least may still be carried out by some of the Iraqi employees on the projects. |
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| Consequences if contractors' work is slowed | ||||||||||||||||||||
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STAN SOLOWAY: That's probably more a question for Sheba than me, but clearly there is a general consensus amongst anybody you talk to, regardless of their views on whether we should have got involved in Iraq in the first place, is that we're there and it's very important to move the reconstruction and the development process along as quickly as possible to show results and to provide support that's necessary and to create an environment that has the sort of situation on the ground, if you will, to move forward rather than stagnate. I think everybody would agree with that.
I think at the base you really have to focus on the security force. Until we get the security situation somewhat stabilized throughout the entire country, it really will be hard to get these other efforts going to the degree we'd like to see them going. It doesn't mean they can't be chugging along. I think we will continue to see fits and starts like we have been seeing all along. RAY SUAREZ: Well, bottom line, Stan Soloway, does it mean that we are going to get less stuff done for the $87 billion that's been budgeted for this year, just because it's turning out to be more expensive? STAN SOLOWAY: To the degree the security environment remains unstable in certain area, it's clearly going to slow down some of the work in those areas, and other area, as Sheba said, work is continuing along at a relatively reasonable pace, not problem-free, but relatively so. So clearly there is a direct relationship between the security environment and your ability to get the job done in a timely fashion. RAY SUAREZ: Thanks for being here. SHEBA CROCKER: Thank you. |
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RAY
SUAREZ: Despite the dangers in Iraq, Americans are signing up by the
hundreds to work on the ground there. They're mainly engineers, cook,
plumbers, drivers and other laborers. The U.S. military calls them soft
targets. There are thousands of them trying to earn a living in Iraq.
They can make upwards of $100,000 for a year of work; the first $80,000
tax-free. They work for companies like Halliburton and its subsidiary,
Kellogg Brown & Root and others like Bechtel and DynCorp. 
JOHN
WARREN: Her workman's comp. just ran out. We're living with my mother-in-law.
It's a necessity. Like I said, you know, it's giving me an opportunity
to do things that I wouldn't have been able to do before with my family.
STAN
SOLOWAY: From what I'm told by the companies that are over there, there
are certainly pockets where the tensions are higher today than they
were 60 days ago or 90 days ago, but these are companies that went in
knowing this was going to be a hostile and difficult environment. You
have to keep in mind that we really have three concurrent operations
taking place today. We have the military support from a contractors'
perspective, you have the military support, which is the logistics,
the food, ammunitions supply, servicing the weapons systems and so forth,
which is a very sophisticated, high technology system. You have the
physical reconstruction of the country and then you have the developmental
assistance, rule of law, environmental engineering, health care and
so forth, all going on at the same time. 
SHEBA
CROCKER: I think that's a unique aspect of this. I think it's important
for us to remember that we have largely been in a war zone in Iraq since
the president declared an end to major combat operations. It hasn't
been major combat the entire time, but there have been pockets of real
violence throughout since the end of the war last year. And what we've
seen in the last few weeks is an upsurge in that violence. I think it's
also fair to say that the security costs and some of the other things
the companies are facing in Iraq have actually increased and have increased
beyond what I think U.S. government was expecting they might be for
these companies when we started the reconstruction efforts.
STAN
SOLOWAY: There's a process you go through. These are not by and large
fixed-price contracts. But there is a process you go through to determine
if the costs associated with the change is a fair and reasonable one,
if it's driven by a requirement from the government or the security
environment itself. 
SHEBA
CROCKER: Well, I think so far we haven't seen a major downturn in the
number of people who are willing to go over to Iraq, because I think
the financial incentives are still really large. At the same time, I
think it's largely an individual decision, and we have heard stories
from some companies that are over there that some of their employees
are just wanting to come home earlier, actually leaving before their
contracts run out. I think on the ground in Iraq, the impact of some
of this may be that we see further delays, for example, in trying to
get the electricity grid up to where the coalition provisional authority
was hoping it would be by the summer, and we're about to enter the summer
months in Iraq, so if we see some of the companies that have been in
there doing the electricity contracts in particular pulling out, that
could cause some problems in the summer months. 
What
we have not seen are companies that just arbitrarily say, "We're
not going to do the work." In terms of the personnel, I have talked
to no fewer than a dozen CEOs in the last two days who have people over
there, and what you have really are a lot of folks, as you heard in
the clip you ran, take very seriously their role supporting the military.
They are in fact accompanying the force.
RAY
SUAREZ: Is there also a political dimension to this in that if you can't
get some of this work done, the job of long-term winning over of the
people to a new way of doing things, a new way of running a country,
is going to be more difficult? 
SHEBA
CROCKER: I think that's right. And one of the things all this shows
is how interlocking all of these various aspects to a reconstruction
effort are. So security is very heavily dependent on political considerations
on the ground and also on economic considerations, and one of the that
things we're seeing in Iraq, there has been very high unemployment throughout,
and although the coalition provisional authority numbers now suggest
the unemployment levels have somewhat gone down, I think it's fair to
say they are still very high. And when you have a number of people out
on the streets without anything to do and possibly getting angrier by
the day at things like the lack of basic services or at least inadequate
basic services in their view, it becomes that much more important to
get those people employed and back to work and to start things going
on the economic front that will actually help somewhat on the security
front. Of course, it's hard to say which should come first.