RAY SUAREZ: In a memo released by the Pentagon yesterday, U.S. officials said $18.6 billion in U.S.-funded contracts to rebuild Iraq's infrastructure, everything from phone service to hospitals to the water supply, are available only to companies from the U.S., Iraq, coalition partners and force contributing nations.
The memo from Deputy Defense Secretary Paul Wolfowitz said the coalition members-only policy is in the "essential security interests of the U.S." Countries whose firms are excluded from the Iraq work took strong exception. Canada's prime minister-elect Paul Martin:
PAUL MARTIN: I find it really very difficult to fathom. First of all, Canada has put in close to $300 million in terms of the reconstruction of Iraq. I understand the importance of these kinds of contracts, but this shouldn't be just about who gets contracts, who gets business. It ought to be what is the best thing for the people of Iraq, and how are we going to participate in that.
RAY SUAREZ: The German government called the limits unacceptable. Foreign Minister Joschka Fischer:
JOSCHKA FISCHER (Translated ): We noted the reports today with astonishment, and we will be speaking about it with the American side.
RAY SUAREZ: And European Union officials said they'll check out whether the restrictions violate world trade rules. White House spokesman Scott McClellan answered administration critics.
SCOTT McCLELLAN: If countries decide they want to participate in the efforts and join the efforts of the coalition forces in Iraq, then circumstances can change. And we would be glad to discuss those matters with countries.
RAY SUAREZ: McClellan said firms from excluded countries can participate as U.S. subcontractors, and can bid on non-U.S. contracts in Iraq. As for the American contracts, they were to be open for bids today. But Pentagon officials postponed starting the process by a week, citing high-level policy discussions.
For more on all this, we get two views. Congressman Henry Waxman is a Democrat of California. He's the ranking member of the Government Reform Committee. And James Schlesinger was secretary of defense and director of central intelligence during the Nixon and Ford administrations. He's a member of the Defense Policy Board, a group that advises the secretary of defense.
Representative Waxman, what do you make of the word that's come from the assistant secretary of defense?
REP. HENRY WAXMAN: I think this policy is a mistake for a number of reasons.
I think we want to reach out and have international cooperation, and this policy excluding a number of countries is having a counter effect to that as you could see by the introductory piece.
Secondly, we want as taxpayers to get our money's worth. The whole idea of competition between competing companies to get the best value shouldn't be limited by excluding very capable companies that can do the job. And then thirdly the list is so arbitrary. Turkey can participate even though they refuse to let us use their air bases, but Germany, where they did allow us to use their air bases, can't participate. They all can participate as subcontractors so it just seems to me a very strange idea and counterproductive to the idea of getting more international cooperation in rebuilding Iraq.
RAY SUAREZ: Mr. Secretary, what do you make of the policy?
JAMES SCHLESINGER: I think it's a perfectly reasonable policy. In the first place this is all taxpayer money. We are in effect rewarding those who joined the coalition or those who have participated subsequently as donors. Others who have obstructed our policies and have rebuffed Colin Powell when he requested that they join in the donor campaign are going to be cut out. That seems to me to be perfectly reasonable.
RAY SUAREZ: What about Representative Waxman's point that you're not necessarily going for the most competent bidder or the lowest bidder but one that's on a pre-screened national representative list?
JAMES SCHLESINGER: I think with 63 countries on the list that can compete and perhaps more will be added later that we will have considerable competition.
RAY SUAREZ: Congressman Waxman, that's not an unheard of principle in politics, is it? Reward your friends and help in effect those countries that helped you along the way --
REP. HENRY WAXMAN: I think the people we most need to reward are the American people who pay taxes. The idea that we would allow their tax paid dollars to be wasted is offensive to me. We have Halliburton right now in Iraq. It's presumably an American corporation. It does have subsidiaries in the Cayman Islands. They even had a subsidiary that was dealing with Saddam Hussein when he was in power in Iran and Libya.
Yet they, as your news story indicated in the opening of the show, are being charged with over requiring the American taxpayers to pay for gasoline that's being brought into Iraq.
For example, they're charging $2.64 a gallon to bring gasoline in from Kuwait to Iraq while the Iraq-owned oil company can do the same thing for less than a dollar. And it's being sold to the people in Iraq for 5 cents.
Well, how do Americans feel when they go to the pump and pay $1.75-$1.80 a gallon finding out that they're paying $2.64, which is almost two or three times what should be required to purchase the gasoline? It seems to me there's a gouging going on.
RAY SUAREZ: Congressman, let me ask you....
REP. HENRY WAXMAN: Yes.
RAY SUAREZ: …because you have been someone who has been consistently raising the issue of single source and no-bid contracts mentioning specifically Halliburton and other large American companies, doesn't this move the emphasis away from them by opening the bidding up in 63 different countries?
Doesn't it ... the intention to quickly announce and award these contracts and move them out of the single bid, single source area satisfy some of the things that you've been demanding all along?
REP. HENRY WAXMAN: Well, I hope they'll have open bids. But the idea of an open bid is a competition between companies that can do the job. And to say that a company that's located in Canada can't compete even though they're our NAFTA partner but in Egypt they can, even though their autocratic government is so hostile to democracy in the Middle East doesn't make a lot of sense to me.
If we're going to award contracts, it ought to be based on who can do the job. I certainly want the American government to make sure that they're watching out for abuse and waste in these contracts. I don't think they've done that in the case of Halliburton.
So I don't have a lot of confidence they'll do it in other ... in the $18.7 billion they're about to award in new contracts for Iraq.
RAY SUAREZ: Mr. Secretary, what about some of the points that Congressman Waxman makes about multiply nationally base companies that it's hard to tell what country they're from, that the single mission of protecting the American taxpayer seems to have gotten secondary role here?
JAMES SCHLESINGER: Well, I think that there is no question, as the congressman has indicated, that Halliburton is an American company. It may have offshore subsidiaries but no one identifies it as a French company.
One can say that we have moved to the second phase. When we went in to Iraq, there was a requirement to respond to electric power shortages, plants down, the oil facilities had to be brought back and so we had to operate quickly without an extended competition.
Halliburton got one contract. Bechtel got another contract from the Department of State. We've now moved into phase two.
Just as you indicated earlier that we are going to move away from single source and we now have competition -- with 63 countries in there, including many of the European countries -- England, Spain, Italy, Denmark, Norway, Turkey that was mentioned -- these countries are quite capable and they will be competing.
RAY SUAREZ: But what about some of the gray areas? The Germans are already on the ground in Iraq helping rebuild the water system. The French helped out in Afghanistan but chose not to in Iraq. Congressman Waxman points out that there are some countries on the list that wouldn't pass the democracy sniff test necessarily.
JAMES SCHLESINGER: Well, that is in contradiction to his desire to get all these countries in there competing, whether they are democracies or not.
If they have the lowest price according to the congressman's logic, they should be welcome to come in to Iraq.
Now, in the case of France or of Germany, what happened was that they obstructed American policy, went around the world to obstruct American policy and then subsequently when we called upon other countries to donate forces, donate money, they did not show up. It seems to me that to reward one's friends is a perfectly reasonable action to take particularly when it's being done with American money.
RAY SUAREZ: Did you do anything like that when you were secretary of defense?
JAMES SCHLESINGER: I occasionally would crack down on a particular country. It was during the OPEC run-up of OPEC prices, and I began to charge much more for research and development activities to countries in the Middle East that had participated in running up the prices.
RAY SUAREZ: Congressman Waxman, what about that idea of rewarding your friends?
REP. HENRY WAXMAN: It seems this administration does a good job of rewarding its friends. Halliburton, for example, is a very close friend to this administration.
When I look at the failure of the administration, I've been asking them for six months for an explanation of why we're getting overcharged almost three times more for gasoline, why we're spending hundreds of millions of dollars that can't be explained, this administration refuses to answer. It just seems to me at best it's a case of mismanagement.
But it could well be a case of government-sanctioned profiteering. If that's what we're doing for our local friends in America, I don't like it. I don't think the taxpayers are well served by it. I would point out in terms of inconsistencies, Mr. Schlesinger is one of the co-chairs of a committee looking at post Iraq reconstruction which has, as I understand it, come out strongly for trying to bring in more international cooperation.
When we tell countries they can't participate you know what their reaction is going to be. It's what we saw today when Russia said they're not going to forgive their debt that Iraq owes them.
Other countries are going to make it more difficult for us to succeed in Iraq. I think we made a mistake not getting more countries with us in the war effort to start with. We've got to correct that error and reach out and involve more nations now in getting the best job done for the people of Iraq and for our taxpayers.
RAY SUAREZ: Will this encourage rather than discourage as the congressman suggests international participation in rebuilding Iraq?
JAMES SCHLESINGER: I doubt it will have very much effect. We've been living with this fantasy that there's going to be this flow of international cooperation. What we see here is that certain countries would like to get push up to the trough, put in by the American taxpayer.
They have not been particularly generous in supporting the reconstruction after an earlier period in which they attempted to obstruct the actions of the U.S. government and in effect save Saddam Hussein.
RAY SUAREZ: Mr. Secretary, Mr. Congressman, thank you both.