Iraq Reconstruction Spells Opportunity

In some areas, large companies will dominate the bidding for contracts to rebuild Iraq. "When you're a small company, it might seem like a daunting risk to handle a large project on another continent, in a place that's probably not going to be that secure for a long time," Baxter says.

Indeed, large corporations have already won several big reconstruction contracts. Seattle-based Stevedoring Services of America, a shipping and marine cargo company, has landed a $4.8 million deal from the U.S. government to upgrade Iraq's deep-water port of Umm Qasr, which was damaged by fighting early in the war and is a vital sea lifeline for Iraq. And USAID has asked six major construction conglomerates--Bechtel, Fluor, Halliburton, Louis Berger Group, Parsons Corp and Washington Group--to compete for the first major infrastructure reconstruction contract.

But small entrepreneurs also can compete for and win some of these contracts. "Where the opportunity lies for smaller companies is in the subcontracts of the bigger contracts, where you only have to handle a small aspect and don't have to take the huge risks of sending tons of employees to Iraq," says Baxter. "A big company like a Bechtel or a Halliburton gets a big infrastructure rebuilding contract and then hires smaller companies to handles certain aspects of the larger deal." Indeed, Halliburton last month was given an open-ended contract by the U.S. government to extinguish oil well fires in southern Iraq and to rebuild some of southern Iraq's oil infrastructure. After receiving the contract, Halliburton immediately hired small Texas-based subcontractors Boots & Coots Well Control Inc. and Wild Well Control Inc. to take charge of some of the fire-fighting.

In addition to repairing Iraq's oil infrastructure, some rebuilding tasks that could involve small companies include fixing and maintaining the deep-water port of Umm Qasr and rebuilding more than 2,000 miles of Iraq's highways and secondary roads, especially in areas south of Baghdad that saw heavy fighting. Several U.S. officials also have mentioned the need for purifying water; and one small U.S. company, Moving Water Industries of Deerfield Beach, Florida, has already begun jockeying to get water purification subcontracts. Moving Water Industries, a water-pump manufacturer, hopes to land a contract supplying drinking water to Iraqis and restoring southern Iraq's badly damaged--but potentially fertile--marsh wetlands, which were drained by Saddam during the 1990s in an attempt to punish dissident southerners after the first Gulf War.

Other American officials have highlighted the need to hand out contracts to companies that can provide security for other businesses operating in Iraq. There will be a need for private military companies (PMCs) to provide security and handle similar tasks in Iraq, says Peter W. Singer, an expert on PMCs at the Brookings Institution in Washington, DC. Most of these PMCs are relatively small firms.

Small service firms--finance firms, consulting groups and the like--are also optimistic about their chances for Iraq subcontracts. Ellerbe Becket, a Minneapolis-based architecture and design firm, believes it can win subcontracts to build hospitals, schools and even sports stadiums in Iraq. After all, USAID has already stated that the U.S. will help rebuild at least 6,000 school buildings in Iraq.

Charlotte, North Carolina-based engineering firm Freeman White, which has experience working with hospitals and health-care firms, apparently shares Ellerbe Becket's belief--Freeman White reportedly is meeting with the Department of Defense to discuss rebuilding Iraq's medical infrastructure. And many small and midsized consulting groups in Washington, DC, think they can win subcontracts to help teach the first free generation of Iraqi professionals how to utilize the new medical, financial, energy and educational infrastructure that will be built for them. In fact, the U.S. has already announced that it will give a contract for emergency relief and near-term rehabilitation efforts in Iraq to International Resources Group, a Washington, DC, consulting firm.

To win these subcontracts, entrepreneurs will need to demonstrate several skills, Iraq experts say. Having an established relationship with the Pentagon or USAID, as well as some experience working in an unstable environment, will be vital, says Baxter. Experience working in dangerous places will be particularly important for small companies that plan to compete for oil and gas subcontracts, since the petroleum industry could be a target of Iraqi militants.

International Resources Group, for example, has worked in many other unstable environments, while Boots & Coots and Wild Well have previous experience putting out oil well fires in dangerous locales. To lessen the dangers involved in working overseas, in a potentially unstable environment, small companies in one industry may want to form a consortium and bid for subcontracts together, thereby sharing both profits and risks.

Having a regional presence in place can help as well. "It's important to already have some presence in the Middle East, so the people handing out the contracts realize that you understand and can adapt to foreign cultures," says Ellerbe Becket director of communications Stuart Smith. (The company's CEO, Rick Lincicome, is in the Middle East presently and was unavailable for interview.) "We have two small offices, in Cairo and Dubai, so we can show we comprehend the region."

Smith also notes that having an established name, even in a small niche industry, helps in winning international contracts. "When you compete for an international contract, it helps if you have some sort of global prestige, even if it's limited to one field--we're not big, but we're well-known globally for building health-care facilities," Smith says. "There are a lot of locally trained professionals you can draw on, and they prefer to work with a company that has a global reputation."

Joshua Kurlantzick is a writer in Washington, DC, and a frequent contributor to Entrepreneur.com.