05 Mar 04. Reuters reported that the U.S. Army canceled a $327 million contract to equip the Iraqi army on Friday, citing technical problems with the bidding process, and denied cronyism played a role in awarding the original deal.

An Army official told reporters the original contract to Virginia-based company Nour USA, whose chairman is a close friend of Iraqi Governing Council member Ahmed Chalabi, had been withdrawn and new proposals for the work would be sought.

The official said a review of the contract found a huge spread in competing bids, an indication competing suppliers had not understood the contract requirements in a uniform way.

“When we looked at the statement of work we saw that there were some ambiguities in there,” said the official who spoke on condition he was not further identified. The contract covers items from military vehicles and assault rifles to basic equipment such as backpacks. The cancellation is a blow to the U.S. military, which is racing to equip the Iraqi Army ahead of the scheduled handover from U.S. forces to the Iraqis on June 30.

Problems with the contract also highlight the complexities in the contracting process in Iraq, where bickering and claims of cronyism in the award of lucrative business to rebuild the country have been rife. Losing companies for the Iraqi Army deal said their bids were not properly assessed, that Nour USA had made an unrealistically low bid and that it did not have the experience to fulfill the contract. Nour USA spokesman Robert Hoopes said the company had not been informed yet of the decision to cancel the contract. “As far as we know no decision has been taken. Therefore I have no comment on it,” said Hoopes.Nour USA has said it stands by its proposal and insists it won the deal on merit and not because of chairman Houda Farouki’s close friendship with Chalabi.

POLITICS NOT INVOLVED, SAYS ARMY

The U.S. Army official also rejected suggestions that political connections played a role in the initial award to Nour. “We don’t know of any and I will tell you the procurement process is pretty much exempt from those sorts of things,” he said. “I want to make it very clear that Nour’s capabilities are not being assumed to be invalid.”

A new contract would immediately be sought by the U.S. Army Materiel Command located in Northern Virginia. The original award was made by the Coalition Provisional Authority in Iraq.

The official said alternatives to quickly supply the Iraqi Army were also being examined.

Last week, the Army asked Nour USA to stop all work on the contract after being informed that two companies, Polish state-run arms maker Bumar and Jordanian company Cemex Global Inc., had filed protests with the General Accounting Office, the investigative arm of the U.S. Congress. Nour USA’s winning bid was met with an uproar in Poland where local companies had hoped to be rewarded for their support for U.S. forces in Iraq.

Other protesting companies included Raytheon Technical Services Company, a subsidiary of Raytheon Co. (NYSE:RTN – News), and General Dynamics Ordnance and Tactical Systems, Inc., a unit of General Dynamics Corp. (NYSE:GD – News).

The Coalition Provisional Authority said last month that Nour was chosen because it priced its offer at $327 million, significantly less than the $560 million proposed by Bumar, for example. It said work was set to be completed by February 2005.