War with Iraq could boost U.S. construction industry

The construction industry is one of the few areas of the economy expected to be boosted by the United States’ conflict with Iraq.

Construction companies, defense contractors and oil service businesses are likely to benefit from the costs of war and reconstruction. The United Nations Development Program estimates the rebuilding of Iraq to cost $30 billion over three years. The U.S. Agency for International Development estimates the construction of bridges, roads, airports and schools will cost $600 million over 21 months.

How does this affect the construction industry? The Bush administration has already requested bids from six construction giants, and the U.S. Army of Corps of Engineers has asked 13 companies to bid for an “indefinite quantity” of orders that relate to construction in the Middle East. It is likely the war with Iraq will increase demand for construction equipment and manpower.

“Until the fighting stops, I don’t think we will know how much or what type of work will be required, what the time frame or budget for it will be,” said Ken Simonson, chief economist for the Associated General Contractors of America.

While most construction will occur after the war, the U.S. military has been increasing its wartime contracts with companies so military personnel will be free for front-line duty. Contractors are hired to construct and maintain military bases and build prison facilities for prisoners of war. About 5,200 construction and defense contractors supported 500,000 troops during the Persian Gulf War, and that number is expected to increase in the current Iraqi conflict, according to Air Force Magazine.

During the Gulf War, U.S. firms obtained 70 percent of post-war reconstruction projects, with European contractors holding 30 percent of the contracts. USAID recently announced its plans to limit reconstruction contracts to American firms. International construction companies have cried out against USAID’s decision. Other organizations have described the closed-door process as a way to hand contracts to companies that have close ties to the White House.

“This is economic unilateralism,” Mikhail V. Margelov, chairman of the Russian Parliament’s Committee for Foreign Affairs told The Boston Globe. “It is not wise to award all that money to U.S. contractors. The only possible way to rebuild is for a new Marshall Plan that includes multilateral participation and transparent bids.”

USAID spokeswoman Ellen Yount replied that the process was conducted in secret because of a government procurement law that is applied in emergency situations. While the larger contracts will be awarded to American companies, the organization anticipates extensive subcontracting to non-American firms.