Controversy in London and Washington over a $293 million security contract intended to safeguard foreign contractors working on reconstruction beyond the lifespan of the dismantled Coalition Provisional Authority (CPA) may lead to the contract being retendered, say sources. As revealed by MEED on 28 May, the crucial contract was awarded to Aegis Defence Services, which includes Tim Spicer, a former colonel in the Scots Guards, who in 1999 was at the centre of a UK government inquiry into the supply of arms to rebel troops in Sierra Leone.

Spicer, the former head of defunct UK security company Sandline International, has acquired a colourful reputation as a mercenary in a number of conflicts in Africa and South East Asia. Industry sources say his lack of experience in Iraq could compromise contractors' safety and hold back progress on essential reconstruction activities. The failure of the CPA to fully recognise the implications of Spicer's role in Aegis may lead to the contract being either retendered or to Spicer being ejected from the consortium.

The recent controversy has highlighted divisions between the US and UK in the final months before the handover of sovereignty to the interim Iraqi government on 28 June. Senior US officials have demanded an explanation as to how the consortium containing Spicer was awarded the contract and a clarification from the UK government on whether the retired colonel is considered to be a risk by military intelligence. Washington is also concerned that Spicer's reputation may affect his ability to work with British forces in the south. Private security operators in Iraq are encouraged to co-operate closely with coalition forces.

US officials have also called into question Spicer's long-standing relationship with Tony Hunter-Choat, security director of the programme management office (PMO), which controls US-funded reconstruction work. Following the official announcement of the award in mid-June, he was quoted in the US press testifying to the 'impeccable credentials' of the Aegis advisory board. Hunter-Choat, a former brigadier in the British army and veteran of the French Foreign Legion, is understood to have remained a close associate of Spicer since they worked together in the Balkans conflict in the late 1990s.

The escalating row further calls into question the issue of due diligence regarding the award of reconstruction contracts in Iraq. It also comes amid new controversy surrounding the drawdown of funds accrued from Iraqi oil sales held in the Development Fund for Iraq (DFI) and the award of contracts to Halliburton of the US.

Tensions within the CPA over the inability to tackle crucial aspects of reconstruction are understood to have intensified over the last six months as the former chief administrator Paul Bremer increasingly spent more timein the US. This and the ongoing conflict between the State Department and the Pentagon over the allocation of the $18,600 million committed under the Iraq Relief & Reconstruction Fund (IRRF) almost led to the protest resignation in March of David Nash, director of the PMO. Less than $350 million from the IRRF has been spent on improving infrastructure in Iraq since Nash arrived in Baghdad last November.

A cloud of uncertainty also hangs over the future of $5,000 million held in reserve by the IRRF for the interim period after 28 June. Two weeks prior to the handover, the Pentagon ceded responsibility for Iraqi reconstruction to the State Department, which has adopted a wait-and-see strategy to releasing any further funds.

Bremer had become increasingly distracted from the management of the CPA by his political ambitions in the US, where he is understood to be lobbying for the position of Secretary of State should Preside