The quiet giant: Bechtel wins contract to rebuild Iraq
A mere four months after the Tacoma Narrows Bridge opened in 1940, it bucked and swayed and plunged in a brisk wind. A replacement was built a decade later and still stands, but for civil engineers Galloping Gertie remains the more vivid presence.
"I studied the collapse in graduate school," says Joe Collins, part of a team now building a new bridge at the site. "Most of us did. When my adviser learned I was coming here, he said, 'Make sure we're not teaching your bridge in future classes.' "
The steel-and-concrete structure will be the longest new suspension bridge in this country since 1964 and an unusual example of a new span constructed alongside an existing one. That makes it a routinely unprecedented effort for Bechtel Group Inc., the San Francisco construction and engineering company that is co-managing the project.
Bechtel prides itself on the monumental. Its achievements include Hoover Dam, the English Channel Tunnel, the San Francisco and Portland light-rail systems, the first major pipeline across the Middle East and the San Francisco-Oakland Bay Bridge. Bechtel worked on the design or construction of more than half the nuclear power plants in the United States and is building a city for 300,000 in the Arabian desert.
But it never has undertaken anything quite like its latest mission.
Seven weeks ago, Bechtel won a secret, invitation-only U.S. government contract to rebuild Iraq. The work of repairing hospitals, schools, government buildings and roads will get under way in earnest this summer under an 18-month, $680 million contract. Experts see the contract as a first step, and say the deal ultimately could be worth billions if the Bush administration is serious about substantially upgrading Iraq's infrastructure.
It's nation-building on a scale never before attempted by the U.S. government, much less a single company. The spotlight has been intense, with criticism surfacing in the media and in the streets.
Activists charge "invasion"
Activists decrying "the corporate invasion of Iraq" tried to block the entrance to Bechtel's headquarters last Thursday. Forty-three were arrested. The protests were a sequel to a much bigger demonstration in late March, which also resulted in dozens of arrests. Meanwhile, newspaper editorials and columnists talk darkly of insider connections at Bechtel that date from the Reagan administration. The company's lengthy and sometimes controversial past in the Middle East is being examined anew.
Jim Illich, Bechtel principal vice president, and other executives say the company is misunderstood. Partly that's because few ever see the real Bechtel, which isn't at the headquarters. It's in the field, out where the vast majority of the company's 47,000 employees work on dozens of multiyear projects worth as much as or more than the Iraq contract.
Blending in seamlessly is part of the Bechtel philosophy of living in the community, of literally becoming the community, for the duration of a mission.
A visitor to the Tacoma Narrows construction site will search in vain for signs of Bechtel's involvement. At the concrete supply station, it says Glacier Northwest. A pickup parked under the current bridge says General Construction Co. A highway ramp is being built by crews whose vehicles are labeled Wilson Construction Co. and Pilchuck Contractors.
Even the folks who come directly from Bechtel or its co-manager, Omaha, Neb.-based Peter Kiewit Sons' Inc., are advised to play down their affiliations. Several Kiewit employees arrived with cars emblazoned with the company name. The vehicles were repainted.
"I want people to lose their identity for a few years," says project chief Manuel Rondon. Because Bechtel employees are proud of it, this is a difficult message.
"Some are less understanding than others," Rondon says.
Perhaps, he adds, the name Bechtel will appear in invitations for the bridge's inauguration, scheduled for 2007. Then he rejects even that possibility: They will say Tacoma Narrows Constructors, the name Bechtel and Kiewit are working under.
The first years of the Reagan administration were sweet for Bechtel. Revenue in 1981 hit a record $11.4 billion; in 1982, it jumped 20 percent to $13.6 billion. Bechtel President George Shultz resigned to become U.S. secretary of state. Vice President Caspar Weinberger left to be secretary of defense. Former Vice President W. Kenneth Davis was deputy secretary of the Energy Department.
With such congenial folks running the country, the company appeared as powerful as one of its nuclear reactors. But a recession at home and falling oil prices in the Middle East cut sharply into new contracts.
Bechtel quickly slashed its rolls, cutting employment in half. "Pretty drastic," conceded then-chief executive Stephen Bechtel Jr.
A publicly traded company might not be as nimble — or as brutal. But it saved Bechtel.
"If you look at the top 20 companies in our industry 20 years ago, most won't be on the list anymore," says Illich, who spent more than a decade out in the field building pipelines before becoming an executive. "A lot of our competitors have gone under."
$3 trillion in business
In an interview in his San Francisco office, Illich tries to put Bechtel and Iraq in perspective. He draws a circle on a white board, puts the figure of $3 trillion next to it. That's the worldwide annual total for engineering, procurement and construction.
He cuts off a tiny slice with a red marker. That's Bechtel's revenues in 2002. After the trough of the late 1980s, when revenue fell below $5 billion, and the 1999 peak, when it hit $15.1 billion, Bechtel is back to where it was in 1981: $11.6 billion.
"Divide that by 100," Illich instructs. That's the number of big projects the company has going at any one time. The Iraq contract is merely one of those. "You can't even see it," he notes.
Most of the money from the Iraq contract will go to subcontractors hired by Bechtel. "Everyone says Iraq is a gravy train," says Illich, snorting at the sheer wrongheadedness of such an assertion. "Everyone" includes many experts who believe that the government must appropriate billions more to get Iraq back on its feet, and that much of this, too, will flow to Bechtel.
But Illich says the truth is this: Even for Bechtel, nothing is a sure thing.
"In Indonesia, we were building infrastructure — power plants, pipelines," says Illich. "It was a fairly stable place, a sweet spot. Then in 1997 the Thai prime minister floated the baht (the Thai currency), and everyone got the Asian flu. Indonesia imploded. Eight months later, it was gone. In Australia in the mid-'90s, we had several hundred employees. That dwindled to 31 as things dried up. Then there was the rebound. There are now a thousand. Our telecom division had 50 people in 1997. Eighteen months later it had 2,000. Telecom imploded, and now there are a thousand."
Winning a contract is only half the battle. Many contracts have clauses that penalize the builder if the work isn't completed on time. For the Tacoma bridge, the fines start at $12,500 a day and rise to a maximum of $45 million.
Competitors who failed, Illich says, "weren't able to execute. They call us and say, 'Can you buy us?' We say, 'No, you don't fit our culture.' They call a half-hour later and say, 'How about 50 cents on the dollar?' "
Bechtel is no stranger to criticism. A retired Massachusetts judge was recently appointed to lead an investigation of massive cost overruns in a $14.6-billion highway project in Boston — dubbed the Big Dig — that Bechtel is co-managing. Bechtel says it looks forward to a "fair, objective, and expert review of its record."
Bechtel also drew the wrath of anti-globalization activists after a partially owned subsidiary began operating the water system in the Bolivian city of Cochabamba in late 1999. Rates were raised to pay for improvements in the system, which sparked riots. In April 2000, the Bolivian government canceled the contract — which a Bechtel spokesman chalked up to politics.
All the scorn perplexes and infuriates the company, the largest privately owned company in California. Bechtel's Web site chastises journalists for "uncritically reporting innuendo from partisan organizations and political critics." It says allegations of "friends in high places" are "specious or irrelevant." Executives forcefully reject descriptions of Bechtel as a sort of maligned behemoth.
"We are a tiny, tiny part of a highly fragmented industry," says Illich. "This business is as tough as a night in jail."
Putting out the fires
The low-key attitude that Bechtel trumpets so much isn't born out of feelings of inadequacy — exactly the opposite: When you know you're good, you don't have to remind people every five minutes — unless your abilities or your record are called into question. That's what happened at the beginning of the Iraq war, when Halliburton won a secret government contract to put out oil wells torched by Saddam Hussein. The company attributed the award to its "proven track-record."
Halliburton said in its news release that its crews "brought 320 wells in Kuwait under control" in 1991.
There was considerable muttering at Bechtel over that claim. Bechtel was the general contractor hired by the Kuwaiti government to douse the burning wells, which totaled 650. The company recruited, sustained and managed an international force of 10,000 engineers, technicians and support personnel.
Terry Farley, the now-retired Bechtel executive who had overseen the Kuwait effort, went public in the trade journal Engineering News Record, saying Halliburton "put out no fires — zero." Bechtel's official corporate history doesn't mention any Halliburton involvement in Kuwait.
Farley is a legend in the business, the archetypal Bechtel employee who gave pep talks nicknamed "Eat Dirt and Die for Bechtel." He won the Engineering News Record's man of the year award in 1992 for his work in Kuwait.
The magazine recounted how, after an anti-tank device wounded six workers and blew up part of a building in a supposedly clean area, Farley walked across the zone to convince frightened workers it was safe. The wells were extinguished months, if not years, earlier than forecast, at a savings to the Kuwaitis of more than $1 billion — and considerable profit to Bechtel.
That was Bechtel's hero culture in action. Now, executives say, work is more collaborative, more team-based.
The new style is exemplified by the Bechtel airport team, which works in cubicles on the 15th floor of the headquarters. The two-dozen team members' most recent project was an environmentally sensitive, $35 million terminal for the Caribbean island of Curaçao.
Then Bechtel won the Iraq contract, which included restoring five airports.
"I'm trying to get some people together — frankly, those whose wives will let them go," Thomas Darmody, manager of aviation services, said on a recent morning.
"You work for Bechtel, you have to move," said Tom Esselstrom, a longtime employee who is a manager on the Tacoma bridge project. "Part of the premise of working for a construction company is that you're working yourself out of a job."