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Military construction delayed in Afghanistan by push to award contracts to Afghan firms

KANDAHAR AIR FIELD, Afghanistan (AP) — An effort to give construction projects to Afghan firms is leading to delays at a time when NATO is rushing to accommodate tens of thousands more international troops, U.S. officials say.

The Army Corps of Engineers is trying to award as many construction contracts as possible to Afghan companies to pump money into the local economy and win public support. New contracts are for NATO base expansions, Afghan police stations, Afghan army bases and other facilities.

But officials say the "Afghan First" effort is slowing down badly-needed construction projects. Even U.S. officers who support the goals acknowledge there's a trade-off.

"You can either have it done on time, or contracted to the Afghans," said Col. Kevin Wilson, the head of the U.S. Army Corps of Engineers in the south and west. He says his own office building took longer to complete because it was Afghan-built.

The reasons for the delays are manifold.

Afghan companies often bid on projects that they don't have the money or skills to complete, Wilson said. Quality inspectors end up teaching the basics of drainage or safe electrical wiring.

Small Afghan companies are also under more pressure to pay bribes to local authorities than large international firms, Wilson said. The military has received invoices for as much as $40,000 from Afghan contractors for bogus building permits, he said. International companies either have the power to say no or don't even try to get their money back from the military.

On NATO bases, hours are also lost each day getting Afghan workers through security.

Despite the problems, Wilson says the "Afghan First" program is the right approach given the new focus on winning over the population. The problem is that this year, in the midst of a troop surge, there's just too much to build.

The Army engineers expect to award nearly 355 contracts in fiscal 2010, nearly three times the number awarded in 2009. The dollar value is increasing as well — $3.2 billion from $2.7 billion the year before, according to Army figures.

"The whole ramping up of the U.S. presence here has pushed a big requirement on us," said Col. Michael McCormick, who oversees engineering projects in the north.

And the delays are already piling up. Two Afghan army barracks being built by Virginia-based DynCorp International LLC to house 5,800 soldiers are behind schedule by 14 months to two years, according to a U.S. government report issued Friday.

In the past, most of the contracts would have gone to large international companies like Dyncorp. Many still do: more than 130 international construction companies were registered with the Afghan government in 2009, according to official figures.

But the military now demands that even the international companies incorporate training of Afghan workers and subcontractors. So in nearly every project now, the military is more deeply involved — dictating terms that previously would have been hashed out between prime contractors and subcontractors.

International construction companies and Afghan subcontractors have long had an uneasy relationship. The foreign firms say that they get cheated by fly-by-night Afghan firms. The Afghans say international companies unfairly withhold payment.

One Kabul construction company owner tells of a road he helped build as a subcontractor to a Turkish firm. Mohammad Jan Alikozay said the prime contractor skimped on cement for much of the road, which then started breaking apart within a year. The Turkish company, which he declined to name, had already left the country by then — without completing payments, he said.

"We lost $300,000. And we rebuilt the road," Alikozay said.

Abdul Razaq Asem, who started his Road & Roof Construction Co. with $300 in 2001, has hired a lawyer to explore suing in U.S. courts against an American company that didn't pay him for work on a project to build two Afghan army compounds. He says the company, California-based ECC Inc., snatched away his main subcontractor on the project, then withheld $4 million from him because the project was delayed while he looked for another subcontractor.

A spokesman for ECC said the company does not comment on issues with specific contractors.

Asem said when he started out he often bid too low on U.S. projects because he didn't understand the higher cost of equipment required to meet U.S. safety standards.

Light sockets that he could get for $5 in Turkey cost hundreds of times more when imported from the U.S. as required, Asem said. He blamed international contractors for not being clear about the requirements, then using the inaccurate pricing as a reason to withhold payment. He has since hired Western consultants.

For their part, international firms and inspectors complain of Afghan firms that pocket money and disappear or win contracts by using a name and logo identical to that of a more reputable firm.

In the United States, construction contractors are held to their promise to complete a project by a process known as "bonding," in which they pay a security deposit to be held until work finishes. In Afghanistan, the government has no such requirement, and many small Afghan companies do not have the money on hand anyway.

So when work isn't completed, or disputes arise between companies, there's no easy way to resolve them.

The legal system is so ineffective that no one wants to go to court, explains Aziz Taheer, who works to resolve business disputes for the government's Afghanistan Investment Support Agency.

"Once the case goes to court then it's a problem for both parties because our judicial system is not that clean," Taheer said. "Both sides will pay a lot of money in bribes and it will take a long time."

Instead, the agency tries to act as an impartial mediator, getting the two sides together to talk. However, the mediation usually fails because the agency holds no power to force an agreement, Taheer said.

The Army is trying to establish rules that solve some of these issues, such as requiring the company that wins the contract to do 15 to 25 percent of the work itself, depending on the size of the project.

Before, companies that were good at submitting bids would often subcontract out the entire project for a lesser amount, taking pure profit off the top, McCormick said. In addition, the Army holds the prime contractor responsible for making sure everyone working on the project is paid — even if they're employed by a subcontractor.

But some American firms said the changes mean they're now being treated unfairly. Paul "Tracy" Wright, the Afghanistan director of U.S.-owned AISG Construction, said his firm can lose all the cost savings of subcontracting if they have to monitor every action taken by companies they hire.

Wright already spends a couple days a week trying to screen potential subcontractors at his Kabul offices — asking them about their equipment and requiring photos of buildings they've completed.

"Often completely different companies come in with the same pictures," Wright said.