Cover fears delay rebuilding in Iraq

WASHINGTON - Concerns over excessive liability risks have delayed a US$600 million ($1088.92 million) contract to rebuild Iraq's schools, roads and hospitals that the US Government had hoped to award last week.

Two privately held firms - Bechtel Group, based in San Francisco, and Pasadena, California-based Parsons Corporation - are vying for the contract from the US Agency for International Development (USAid).

A panel of government experts is now reviewing federal law 85-804, which allows agencies to indemnify, or offer extra insurance to contractors, in cases involving unusually hazardous risks, according to sources familiar with the talks.

The officials are trying to determine whether the law would allow USAid to offer such extra insurance, or whether President George W. Bush might have to issue another executive order like that issued to cover certain homeland security contracts awarded after the September 11 terror attacks.

Another option would be to ask Congress to pass a law providing such protections in certain cases, although this would probably take months, congressional aides said.

Officials at USAid were unavailable to comment on the insurance issue. Officials at Bechtel and Parsons declined comment.

Bush's executive order on homeland security contracts would not apply in this case, sources said, since it referred to procurement of anti-terrorism products and services.

Industry sources said such protection was not generally offered to companies engaged in postwar reconstruction.

For instance, the danger of mines could be reasonably expected in a postwar situation.

However, in Iraq, they said, companies faced unknown challenges, including the possibility that they could stumble upon a cache of weapons of mass destruction.

Insurers would not agree to cover such outcomes.

- REUTERS

Herald Feature: Iraq war