USACE doubles value of oil restoration programme

31 October 2003
The US Army Corps of Engineers (USACE) has delayed the award of its two mega-contracts to restore Iraq's oil infrastructure by up to 60 days in order to allow contractors to submit revised prices.

On 29 October contractors were given until 5 November to submit new prices for the two indefinite duration, indefinite quantity (ID/IQ) contracts, which require the successful bidders to restore oil production to pre-war levels by 31 March. USACE says the award of the contract will be delayed by 30-60 days from the expected end-October date.

USACE has also doubled its estimated value for the contracts, though it has not changed the scope of works. USACE sources say sabotage and increased security costs have forced it to raise the maximum value of the two contracts to $1,200 million for the southern oil fields and $800 million for the northern fields. The original ceiling for both contracts was $500 million. The guaranteed minimum value of the contracts remains $500,000. USACE says it has also identified more oil infrastructure repairs than it originally envisaged.

However, sources at USACE say the programme deadlines are likely to remain the same. 'Nothing has changed on the timetable. That does not mean it won't change. But right now we are still aiming at the same target dates.'

Contractors have been asked to resubmit prices for sample elements of work based on a revised set of assumptions that were not included in the original solicitation. 'The amendment changes the basis on which we submitted our prices. The sample problems in the original solicitation were not well defined so all the bidders made assumptions to get their prices. That meant USACE got a wide range of prices based on all sorts of assumptions. What it has done is asked contractors to price the same elements of work with a tighter list of assumptions,' says one contractor.

Six consortia are thought to have submitted bids for the original contracts in late August. By mid-October contractors said the contest appeared to be down to three bidders: the US' Kellogg Brown & Root (KBR); the joint venture of the US' Fluor Danieland the UK's AMEC; and the joint venture between the US' Parsons Internationaland Australia's Worley(MEED 10:10:03).

USACE says spending by incumbent oil reconstruction contractor KBR had reached $1,600 million by 16 October. The $2,000 million upper limit for the oil infrastructure reconstruction work brings the contracts into line with US President Bush's supplemental budget request for $66,000 million for the reconstruction of Iraq. That included a $2,100 million allowance for oil field reconstruction. Bidders for the oil contracts say they expect to receive final approval from congress by early November.

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