Cablegate: U.S. Companies Win $2 Billion Worth of Infrastructure Contracts As Reward for Political Relationship
OO RUEHBC RUEHDE RUEHKUK RUEHROV
DE RUEHTRO #1053/01 3520855
ZNY CCCCC ZZH
O P 180855Z DEC 07
FM AMEMBASSY TRIPOLI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2944
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RHEFDHP/DIA DHP-1 WASHINGTON DC
RUEHEE/ARAB LEAGUE COLLECTIVE
RUEHVT/AMEMBASSY VALLETTA PRIORITY 0245
RUEHLO/AMEMBASSY LONDON PRIORITY 0694
RUEHFR/AMEMBASSY PARIS PRIORITY 0388
RUEHTRO/AMEMBASSY TRIPOLI 3384
C O N F I D E N T I A L SECTION 01 OF 03 TRIPOLI 001053
DEPT FOR NEA/MAG; COMMERCE FOR NATE MASON; TUNIS FOR SEAN COOPER
E.O. 12958: DECL: 12/18/2017
TAGS: BTIO ECON EIND EINV PREL PGOV LY
SUBJECT: U.S. COMPANIES WIN $2 BILLION WORTH OF INFRASTRUCTURE CONTRACTS AS REWARD FOR POLITICAL RELATIONSHIP REF: TRIPOLI 1023 TRIPOLI 00001053 001.2 OF 003 CLASSIFIED BY: Chris Stevens, CDA, Embassy Tripoli, State. REASON: 1.4 (b), (d)
1.(C) Summary: U.S. companies AECOM and the Tennessee Overseas Construction Company (TOCC) inked separate deals worth a total of $2.0 to $3.0 billion with Libya's Housing and Infrastructure Board. AECOM is to provide project management for all infrastructure development under the HIB's auspices, and has committed to an ambitious U.S.-based training program for HIB executives and engineers. TOCC's agreement obliges the company to undertake high-profile infrastructure construction and refurbishment projects in Tripoli and Benghazi; the company envisages bringing up to 130 American employees to Libya in the coming year to help manage its projects. The GOL apparently awarded the contracts to U.S. firms for at least partly political purposes, telling company representatives that the deals symbolize the fact that U.S.-Libyan ties have moved beyond strictly security (i.e., WMD and counter-terrorism) concerns. The agreements underscore that the GOL continues to directly link commercial contracts to political relationships. The potential return to Libya of large numbers of non-official Americans has positive potential for people-to-people and cultural exchange, but could further anger Islamic militants already troubled by U.S.-Libyan reengagement.
AECOM TO MANAGE ALL INFRASTRUCTURE PROJECTS
2.(U) After nearly two months of negotiations, Houston-based company AECOM signed a mega-contract December 13 with Libya's Housing and Infrastructure Board (HIB) to provide project management services. The contract guarantees two years of work for AECOM for $201 million, and provides for three additional option years for a potential total contract value of $574 million. AECOM is to lead the HIB's 250-member Program Management Department in its administering of all projects that fall within the GOL's $50 billion comprehensive housing and infrastructure development program, to include contracts with any third-country companies. The scope of the development program includes urban design and development, housing unit construction, road construction and upgrades, and development of wastewater management systems.
FOCUS ON TRAINING, HUMAN CAPACITY BUILDING
3.(C) Reflecting the GOL's continuing focus on capacity-building, the contract obliges AECOM to train over 100 HIB executives, engineers and technical specialists in project management at AECOM's Houston headquarters during the coming calendar year. Dr. Ibrahim Shukhri, head of HIB's Program Management Department, told P/E Chief December 16 that three senior HIB officials have already applied in Tunis for J-1 visas to undertake a year-long program management course in Houston. Additional tranches of HIB engineers -- currently envisaged as cohorts of 50, 25 and 25 -- are scheduled to undergo three month training courses in Houston beginning in March/April next year. Jim Thompson, President of AECOM subsidiary Turner Collie & Braden and AECOM's signatory on the contract, told P/E Chief December 13 that AECOM plans to send up to 30 American employees to Libya in the first half of 2008 to help manage a bevy of recently concluded housing and infrastructure contracts (reftel and previous).
TOCC WINS MEGA-CONTRACT FOR HOUSING, INFRASTRUCTURE PROJECTS
4.(U) Separately, the Tennessee Oveseas Construction Company (TOCC), in partnership with Washington Group International, signed a LD 1.5 billion (about $1.2 billion) agreement with the HIB December 16.(Note: It is believed that the agreement represents the largest single non-oil and gas deal for a U.S. company in Libya to date. End note.) The deal was concluded in a televised meeting of the HIB at which a total of over LD 6.85 billion (about $5.3 billion) worth of infrastructure contracts with companies from India, China, Korea, Turkey, Russia and Tunisia were signed. TOCC's agreement obliges the company to undertake high-profile infrastructure construction and refurbishment projects in Tripoli and Benghazi, to include housing units, roads and wastewater management. The contract represents a framework agreement; individual contracts for specific projects envisaged in the framework agreement are to be negotiated separately. The agreement guarantees $1.2 billion TRIPOLI 00001053 002.2 OF 003 worth of work, but TOCC's local office director, Selim Edes, told P/E Chief that it could be expanded to include a rainwater collection project in Benghazi, which could bring the total contract value to between $2.5 and $3.0 billion.
LARGE NUMBERS OF AMERICANS TO RETURN TO LIBYA?
5.(C) TOCC Finance Director Jennifer Windus (protect), who signed for the company, told the Charge that the company plans to send 50 American employees, up to a third of whom may come with families (about 15-20 children), to Libya in the next five months. TOCC envisages a total American employee presence of 100 within the coming calendar year, with a possible 30 additional employees in Benghazi if the rainwater collection project comes to fruition. She noted that obtaining Libyan visas and securing appropriate housing could significantly slow the dispatch of those employees. TOCC's Tripoli office currently comprises 15 locally-engaged staff.
AECOM, TOCC BENEFIT FROM GOL'S DESIRE TO SEND POLITICAL SIGNAL
6.(C) Windus told the Charge that Dorda and other HIB officials had stressed that they wanted to award the contract to a U.S. company as "a symbol" of the fact that the bilateral relationship had moved beyond strictly security (i.e., WMD and counter-terrorism) concerns. The fact that TOCC was a U.S. company was "critical" from the HIB's perspective. Windus telephoned P/E Chief later in the day seeking an Embassy quote for the company's press release; she said Dorda had counseled her to solicit remarks emphasizing the political, vice commercial, significance of the contract. (Note: Post's anodyne language welcomed news of the contract as a sign of the continuing development of U.S.-Libyan ties. End note.) Dorda reportedly underscored that the Charge's attendance at the contract signing was "an important symbol of the new relationship".
7.(C) Separately, AECOM's Jim Thompson (protect) shared with P/E Chief December 13 his impression that being an American company had been "extremely important" to securing the contract. He conceded that unnamed European firms had submitted bids that were in some respects more competitive, but the HIB's desire to "buy American" -- in part for purposes of political symbolism -- carried the day for AECOM.
HIB SEEKS GREATER U.S. COMPANY PARTICIPATION IN LIBYA'S INFRASTRUCTURE RENAISSANCE
8.(C) In a meeting with the Charge before the signing ceremony, HIB Chairman Abuzaid Dorda sounded a similar refrain, saying more U.S. companies should "focus on the future" and bid for lucrative GOL development contracts. Noting that some U.S. and European companies remain "hesitant" about doing business in Libya because of past contretemps, he reiterated the GOL's desire for greater participation by U.S. companies in large-scale infrastructure and development projects. Stressing the American angle, he noted that AECOM enjoyed the HIB's "full confidence" and said the HIB would sign a contract worth "hundreds of millions of dollars" (NFI) with U.S. company KBR on December 30 for infrastructure projects in Benghazi.
PUBLIC COMMITMENT TO ANTI-CORRUPTION ...
9.(U) In a subsequent televised meeting of the HIB that resembled nothing so much as a game show, Dorda continued sounding the American theme. TOCC's was the first contract signed on-air; Dr. Shukhri told P/E Chief that the decision had been deliberately designed to "emphasize American participation in the Jamahurriya's development". AECOM's deal also featured prominently in Dorda's remarks, even though the deal was signed several days earlier and no one from the company was present. In a somewhat bizarre lecture clearly crafted to appeal to viewers at home, Dorda chided winners to take seriously the transparency and anti-corruption clauses of their respective contracts. Noting that he had personally blacklisted three foreign companies for unspecified alleged acts of corruption in recent months (NFI), he cautioned contract winners that the GOL has "our methods" for "knowing what you are up to".
10.(C) Companies accused of paying bribes or engaging in other forms of graft would be assumed to be guilty unless able to prove otherwise, would be forced to forfeit their contracts and pay penalties, and would be summarily ejected from the country TRIPOLI 00001053 003.2 OF 003 and not allowed to bid on future GOL contracts. In a seeming contradiction with the "guilty until proven innocent" assumption, Dorda claimed there was "no excuse" for companies not to immediately report solicitations of bribes to the HIB. Once they had done so, it would "be the HIB's problem" to deal with.
... BUT OLD HABITS DIE HARD
11.(C) On the margins of the televised meeting, Brown & Root country director Richard Weeks (protect) told P/E Chief that the HIB delayed providing a copy of its putative Benghazi contract, and only did so on the morning of December 16. Seeking to inflate the figure for the total value of contracts concluded on the day, the HIB pressured KBR to sign the contract without having adequately reviewed it. Weeks said HIB officials took back the sole hard copy they'd been given when they determined that KBR would not sign without having their attorneys perform necessary due diligence. In a last-minute plea to Brown & Root, P/E Chief overheard an HIB official telling Weeks not to worry about the details of the contract because the contract itself was "meaningless". "What is important is that we trust you", the official said. Conceding that the remark confirmed the worst suspicions of some KBR executives about the GOL's approach to the sanctity of contracts, Weeks said he was wrestling with whether share it with his corporate management.
12.(C) Comment: While certainly good news for American business, AECOM and TOCC's wins underscore that the GOL, encouraged by its interactions with the French and Italians, continues to view commercial contracts as means by which to curry political favor. The new deals also represent a potentially significant evolution in the U.S. business presence in Libya. To date, U.S. companies -- with the notable exception of oil and gas concerns -- have largely focused on selling discrete products and services, a relatively straightforward exercise. Participation in performance-based contracts represents a markedly more complicated exercise in which the potential exposure to graft, delayed payment and breach of faith are greater. The potential return to Libya of non-official Americans in numbers not seen since the early 1970's also represents a mixed blessing. The people-to-people and cultural exchange potential are great and will likely be welcomed by many Libyans; however, increased numbers of Americans could constitute a further irritant to (and target for) Islamic militants already leery of U.S.-Libyan reengagement. End comment. STEVENS 0 12/18/2007