Republican-friendly Bechtel wins $680m Iraq contract

The Bush administration faced fresh accusations of overt political favouritism yesterday after it awarded a major Iraq reconstruction project to the Bechtel Corporation, the San Francisco-based construction giant, which has close ties to the Republican Party and the White House.

Bechtel was offered a contract worth up to $680m (£430m) on Thursday to restore Iraq's water and electricity supply and build roads, schools, sewers and hospitals. It was one of six companies, all American, who were invited to compete in the closed-door bidding process overseen by the US Agency for International Development.

Bechtel has a long, undisputed track record of overseeing major construction projects at home and abroad – including several jobs in the wake of the 1991 Gulf War and stretching back to the building of San Francisco's Bay Bridge and the Hoover Dam outside Las Vegas. Still, its selection only added to the growing suspicion that the administration is intent on using the reconstruction process as a way of rewarding its corporate friends and keeping control of post-Iraq firmly in US hands.

Bechtel has made $1.3m in political donations over the past four years, 60 per cent of it to Republicans, according to the Center for Responsive Politics, a Washington campaign watchdog. Its board of directors includes George Shultz, who was secretary of state during the Reagan administration. Its chairman and chief executive, Riley Bechtel, was recently appointed to George Bush's export council.

The Bechtel contract follows on from the even more controversial choice, made in the opening days of the war, to give management of Iraqi oil fires and oilfield reconstruction to Halliburton, the Texas oil services company where Vice President Dick Cheney was chief executive from 1995 to 2000. Halliburton was promised as much as $7bn worth of work, although the Army Corps of Engineers, who made the choice, now say the figure is likely to be closer to $600m because of the relative lack of war damage to the oilfields.

In the US, several congressman – all Democrats – have demanded an investigation of the bidding process, and the selection of Halliburton in particular. Mr Cheney is reported to be receiving anywhere from $160,000 to $1m a year from Halliburton in deferred severance payments. The company has also raised eyebrows because of a track record of cost overruns, inflated invoices and fraud claims.

The General Accounting Office, which monitors congressional spending, has promised to look into all companies selected by the administration.

Outside the US, meanwhile, there have been numerous complaints that the victor is taking all the spoils without regard to calls for United Nations or other international involvement in rebuilding Iraq. British firms were particularly aggrieved when a $4.8m contract to rebuild the port at Umm Qasr went to Stevedoring Services, a US company, even though the soldiers who did the fighting there were British.

British industry morale was a little higher yesterday after assurances that UK companies will soon be included in the bidding process. Colin Adams of the British Consultants and Construction Bureau said: "UK firms are quite clear that the US is going to have prime contractorship, but there is a recognition in many areas, from oil and gas to infrastructure, of British firms."