The Iraqi government is setting up a shadow administration to run Fallujah (search) if a combined force of U.S. Marines and Army soldiers is ordered to assault the insurgent stronghold, the military said Thursday.

Should the attack succeed, Iraqi troops will be the primary force keeping order inside the city and Iraqi administrators will be put in control "as soon as it's safe," said Maj. Jim West, a Marine intelligence planner.

"The Iraqi interim government is establishing a government to take over Fallujah, it's an Iraqi government," he told reporters at a U.S. base outside Fallujah.

The military has $75 million in reconstruction funds available for the city, said Navy Cmdr. Steven Stefani.

He said a psychological operations campaign is already under way, with an AM radio station broadcasting messages about the intent of U.S. forces and instructions to residents of Fallujah.

"We're trying to tell them they have friends out there who care about them, who may have to attack and here's what we want them to do," West said. "It's not to take over the city; it's to return the city to you."

Despite the preparations for a military offensive, the Iraqi government has not given up on negotiations and is speaking with insurgent representatives who include a powerful sheik in the city, Abdullah al-Janabi, who is believed to lead local fighters.

"He's working with the Iraqi government right now and we're following the instructions of the Iraqi government," West said.

U.S. commanders have stressed the go-ahead for an attack must come from Iraq (news - web sites)'s interim Prime Minister Ayad Allawi (search).

If an attack is ordered, West said the U.S. force led by Maj. Gen. Richard Natonski, commander of the 1st Marine Division, could face as many as 5,000 fighters dug in behind defensive works and booby traps. They likely will be fighting as individual bands of 10 to 20 men, both foreign and Iraqi, he added.

He said soldiers and Marines would first isolate Fallujah to prevent insurgents from entering or leaving, while perhaps directing fleeing civilians to refugee camps.

"You cut off roads, you cut off access points for vehicles that can carry explosives," he said.

For now, the city is still open, with civilians — and perhaps insurgents — being allowed to come and go, West said.

Residents have been fleeing for weeks. If there is a larger outflow triggered by fighting, West said the military was getting ready to care for them. "We're not going to let the elderly and the infirm wander around the desert," he said.

West said U.S. planners expected attacking troops to encounter "greater concentrations" of the same guerrilla weapons and tactics seen across Iraq, especially hidden bombs and explosives-packed cars, perhaps detonated after luring U.S. forces into bottlenecks in the city.

Allied guerrillas operating outside Fallujah also may try to attack U.S. bases or troops in the rear as well as widen the rebellion beyond the rebel hot bed, he said.

Marines have been training for months for the assault, guided by their experiences from the aborted three-week siege of Fallujah in April, West said.

Assault forces could face a tough fight in the narrow lanes of the densely packed inner city, where intelligence information about rebel defenses has been more difficult to obtain and where U.S. high-tech weapons are less effective.

Troops will be wary of attempts to lure them into "a soft spot and have it rigged" with remotely triggered bombs, West said.

"These are typical insurgent tactics and we're prepared for that," he said. "I don't think it will slow up our forces. We've built in a lot of countermeasures."

West suggested Iraqi insurgents might be willing to give up fighting before die-hard foreign guerrillas in the city "who are coming to fight and die."