What Are the Statutory, Regulatory, and Other ControllingAuthorities for How Federal Government Contracts Are Awarded? In general, theauthority for awarding federal government contracts can be found in the United States Code (U.S.C. )and the Federal Acquisition Regulation (FAR). The statute in the U.S. Code for the Competition inContracting Act of 1984 (1) explicitly states that the federal government "shall obtain full and open competition through use ofthe competitive procedures in accordance with the requirements of this title and the FederalAcquisition Regulation ." (2) The FAR, the Defense Federal Acquisition Regulation Supplement (DFARS), (3) and the United States Agencyfor International Development (USAID) Acquisition Regulation (AIDAR) outline seven differentcircumstances which permit DOD and USAID to use other than full and open competition in theawarding of federal government contracts. The Competition in Contracting Act cites the followingexceptions to the use of full and open competition. 1. There is only one responsible source available to fulfill the contract requirements. 2. The federal agency's need for these goods or services is of such an unusual and compellingurgency that the federal government would be seriously injured if this contract were notawarded. 3. The federal government needs to ensure that suppliers are maintained in the event of a nationalemergency, or to achieve industrial mobilization, or to establish or achieve or maintain anengineering, development, or research capability. 4. The federal government has an international agreement to make this acquisition through meansother than through full and open competition. 5. A statute specifically authorizes or requires that the contract be made through a specific source. 6. The use of full and open competition may compromise national security. 7. The public interest would be better served by use of other than full and open competition. (4) The procedures for submitting written justifications to use other than full and opencompetition, including review requirements and delegation of authority, are outlined in DFARS,Subparts 206.303-1 and 206.304, and AIDAR 706.3. The Bush Administration has set additional criteria for eligibility for contracting in Iraq. Amemorandum issued by Deputy Secretary of Defense Paul Wolfowitz on December 5, 2003, statesthat he has determined that it is in the public interest to limit competitive bidding for theprocurement of certain Iraqi Relief and Reconstruction prime contracts awarded by the CoalitionProvisional Authority (CPA) and DOD, on behalf of the CPA. (5) (See the next question for therationale.) The statement can be viewed at http://www.rebuilding-iraq.net . What Countries' Businesses Are Eligible to Compete for ContractsFunded with U.S. Appropriated Reconstruction Funds? Contracts issued utilizingFY2003 appropriations were provided under sole source or limited competition procedures thatultimately benefitted U.S. firms. The national security interest was a key justification for excludingcompetition, domestic as well as foreign. However, as most contracts were then provided by USAIDand treated as foreign assistance, they became subject to "buy America" provisions of law under theForeign Assistance Act of 1961, and exempt from international procurement agreements. (6) Foreign countries could,however, participate as sub-contractors to the selected American firms, and are estimated to composehalf or more of the total cost of these contracts. Most FY2004 appropriations -- managed by the CPA -- are being treated somewhatdifferently. Under a previously mentioned December 5, 2003 "Determination and Findings" reportissued by Deputy Secretary of Defense Paul Wolfowitz, prime contracts are subject to full and opencompetition only among U.S. firms and those of 62 other eligible countries, including Iraq, coalitionpartners, and force contributing nations. The rationale for barring other countries' firms is that it is"necessary for the protection of the essential security interests of the United States." Countriesineligible to compete for prime contracts may still participate as sub-contractors. Some excluded countries, such as Germany and France, have protested the decision on thegrounds that it may violate the WTO's Government Procurement Agreement (GPA). Some U.S.officials suggest that the contracting organization, CPA, is not covered by the GPA and need notallow open competition. Others point out that GPA rules and existing practice exempt much foreignassistance from their requirements. The strength of these arguments has been questioned. OnJanuary 13, 2004, President Bush announced that Canada -- previously excluded as an opponent ofthe war, but a significant financial contributor -- could compete for contracts that have not yet beenopen for bids. (7) Will Israeli Businesses Be Eligible to Participate in IraqiContracts? Reflecting political sensitivities in the Middle East, Israeli businesses are not eligible for primecontracts resulting from FY2004 appropriations. Although it has consistently backed U.S. policyin Iraq, Israel did not express official support at the request of the Bush Administration. Israelifirms, however, are eligible to participate in Iraq reconstruction programs as sub-contractors. Reportedly, some are currently acting as sub-contractors in communications, water, security, andagriculture programs. (8) What Federal Agencies or Governing Bodies Are Involved inContracting for the Reconstruction of Iraq? Primary authority for the awarding andadministration of Iraq reconstruction contracts has been transferred to the U.S.-led CoalitionProvisional Authority (CPA) http://www.cpa-iraq.org/ . The CPA Program Management Office(PMO) http://www.rebuilding-iraq.net/ is responsible for selecting projects and overseeing 25 Iraqreconstruction prime contracts worth up to $18.6 billion that were originally to be awarded byFebruary 2004. However, slipped deadlines and the accelerated sovereignty schedule have led toa re-evaluation of the PMO's needs and capabilities. By the end of March 2004, only about $2.2billion of the original $18.6 billion had been obligated. As of May, contracts potentially worth nearly$8 billion of the $18.6 billion in FY2004 supplemental funding had been awarded. Among recentreasons for the slow progress are the requirement for open and competitive bidding for most of thenew reconstruction contracts and inter-agency disputes over control of the funds. Security concerns,escalating since March, have also delayed reconstruction further. Previously, major contract awards and management for postwar Iraq reconstruction projectswere administered by USAID http://www.usaid.gov/iraq/activities.html . Other federal agencieshave taken steps in the awarding and/or disseminating of information on contracts and thecontracting process, including the U.S. Army Corps of Engineers http://www.hq.usace.army.mil/cepa/iraq/contracts.htm and the U.S. Department of State http://usinfo.state.gov/mena/middle_east_north_africa/iraq/iraq.html . It is anticipated that USAIDand the other federal agencies involved with Iraq's reconstruction will continue their roles in thecontracting process as a complement to CPA's efforts. For additional information on federal agencysolicitations, application procedures, and contact information, see CRS Report RS21546, IraqReconstruction Resources: Fact Sheet. Under the Broader Question of Different Authorities, What Is theUSAID Contracting Role in Iraq? USAID has been responsible for contracting themajority of FY2003 reconstruction appropriations in Iraq and the widest range of economic, social,and political development programs. To date, USAID has awarded contracts in seaport and airportadministration, capital construction, theater logistical support, public health, primary and secondaryeducation, personnel support, local governance, agricultural development, and higher education. Although USAID was responsible for the FY2003-funded $1 billion construction contractawarded to Bechtel and an FY2004-funded $1.8 billion follow-on project, the CPA has control overmost of the funding available for reconstruction-related activities, particularly in the infrastructureand security sectors. USAID appears likely to continue to carry out many of the non-constructiondevelopment programs supported by FY2004 appropriations in areas such as education anddemocratization. As of May 18, 2004, USAID had obligated more than $3.5 billion in Iraq aidcontracts and grants. (9) Who are the Major Contractors Involved in the Iraq ReconstructionEffort? The Center for Public Integrity has completed an investigation of contractawards in Iraq and Afghanistan made by DOD, Department of State, and USAID; in the course oftheir inquiry, Center for Public Integrity officials filed Freedom of Information Act requests andagency appeals, studied Security and Exchange Commission filings and other news sources, studiedcontract award histories compiled by a database through the United States General ServicesAdministration of unclassified contracts worth more than $25,000, and made contact withgovernment and non-government officials who awarded and received contracts. The followinginformation was excerpted from the Center for Public Integrity's website. Table 1. The Top 20 Contractors, Ranked by Total ContractValue, for Activities in Iraq and Afghanistan (from 2002 through May 20,2004) Source: The Center for Public Integrity's website, at http://www.publicintegrity.org/ , viewed on June 8, 2004. According to the Center's website, a total of 13 new companies have received contractawards (since the website's last update on March 31, 2004), and nine companies previously awardedcontracts have seen contract increases totaling $5.8 billion.