'We thought the funds would be more evenly distributed [across the sectors] but the real infrastructure needs in Iraq are power and water,' said Lucke. 'Power and water will be the concentration of the follow-on contract.'

USAID is expected to invite contractors before the end of September to bid for the contract. Bidders will be given 45 days to prepare their proposals. Under USAID regulations, the contract will only be open to US companies. Local and international companies will then be eligible to bid for subcontract work.

Bechtel of the US was awarded the initial $680 million capital reconstruction contract in the spring. In August, it was allocated a further $350 million specifically for rebuilding power infrastructure. The company, which has completed most of the assessment work for phase 2, is expected to bid for the follow-on package. Strong competition is expected to come from other US firms capable of handling a job of this magnitude.

The contract remains contingent on the approval by US congress of a $20,000 million supplemental funding bill for Iraq. 'If we are given the funding this will be the largest job that USAID has ever done,' said Lucke.