ENVIRONMENTAL REMEDIATION CONTRACT FOR WAR DAMAGED

C O N F I D E N T I A L KUWAIT 000147 SIPDIS COMMERCE FOR ADVOCACY CENTER E.O. 12958: DECL: 02/10/2014 TAGS: SENV EPET PREL UN IZ KU SUBJECT: ENVIRONMENTAL REMEDIATION CONTRACT FOR WAR DAMAGED KUWAIT OIL FIELD DESTRUCTION STYMIED Classified By: Economic Counselor Oliver John for reasons 1.4(b) and (d ). ¶1. (C) Summary: Hill International, winner of a Project Planning and Supervision Consultant tender for a UN Compensation Commission(UNCC)-funded environmental remediation program for oil-damaged Kuwaiti lands, appears to have been stymied in its effort to gain final GOK approval for the finalized contract to be signed. Dr. Adel Omar Asem, former Deputy Director of the Public Authority for Assessment of Compensation, told econoffs that approval of the contract was being undermined by Kuwaiti agents of one of the losing bidders for the tender, who were using their influence to block approval and signing of the contract and ultimately force a re-tendering of the project. A UNCC governing council delegation arrived in Kuwait February 16 to evaluate the status of efforts to establish an environmental remediation program in Kuwait.(septel) End summary. Background -------------- ¶2. (U) Hill International, a American-Kuwaiti consortium, was awarded a $200 million Project Planning and Supervision Contract(PPSC) by the Kuwait National Focal Point(KNFP) in July 2008 under the Kuwait Environmental Remediation Project(KERP),a $2.9 billion program to remediate environmental damage resulting from damage to Kuwait,s oil infrastructure inflicted by the Iraqi military during their 1990-91 occupation of Kuwait. Hill finalized the contract terms with KNFP in October 2008 and the contract was forwarded to the Legal and Legislative Department of the Council of Ministers and the Audit Bureau for review. Since that time there has been no apparent action on the contract by the GOK nor has Hill been able to receive any meaningful response from the KNFP. A UNCC Governing Council delegation arrived in Kuwait on February 16 to meet with GOK officials and monitor establishment of the remediation program by the GOK. Losing bidders undermine contract finalization -------------- - ¶3. (C) Dr. Adel Omar Asem, former Secretary General of the KNFP, who represented the Kuwait side in the successful finalization of the contract terms, told econoffs (and Commercial Counselor separately) that approval of the contract was being undermined by Kuwaiti backers of one of the losing bidders for the tender. Those backers were using their influence to block GOK approval of the contract and ultimately force a re-tendering of the project. Asem said that there had been an ongoing effort to hinder Hill from succeeding in closing the deal with KNFP. This effort involved efforts to cast doubt on the fairness of the tender procedure and the capabilities of Hill. Asem added that before his tenure at KNFP had ended, he had attended meetings with the Legal Department in which it had raised &false issues8 concerning the fairness of the award to Hill. ¶4. (C) Longtime KNFP Environmental Advisor Dr. Peter Literathy confirmed Asem's narrative: "Everyone knows why the contract is being delayed. Agents for two of the losing bidders are using their 'wasta'(influence) with GOK officials to attack Hill." Literathy said a "nasty" letter had been sent, shortly after the tender had been awarded, by one of the losing agents to the Prime Minister attacking Hill as unqualified, claiming the contract should have been awarded to their clients. ¶5. (C) Asem said if the Legal Department issued a positive evaluation, the KNFP could then authorize the Oil Minister to sign the contract in his capacity as Chairman of the KNFP. However Asem said he expected the project to be re-tendered following a negative review by the Legal Committee. Asem stressed that the procedures under which the project had been awarded had been scrupulously fair. UNCC had reviewed the tender procedures and declared that they exceeded UNCC standards. He said the tender had been &scrutinized for seven months8 by apparent allies of the failed bidders and that no flaws had been identified in the tender process or the ensuing contract. (Note: Asem was forced from his KNFP position and from his position in the Public Authority for Assessment of Compensation, the authorizing agency for the KNFP, shortly after the contract was finalized and submitted to the Legal and Legislative Department for review. End note). ¶6. (SBU) Asem noted in passing that should Hill ultimately be unable to close the deal and sign the contract with the KNFP it would have grounds for legal compensation. He said that Kuwaiti contract law provides that if 60 days pass following the award of a tender and no contract has been signed that the tender is deemed a binding agreement. ¶7. (SBU) Ambassador took the opportunity afforded by the February 17 UNCC Governing Council(GC) meeting with the Amir and new Oil Minister to raise strong concern that eight months had passed since the award of the tender to Hill and the contract had not yet been signed by the Oil Minister or his predecessor. The Oil Minister pled ignorance of the issue, given his less than ten days as Minister, but assured the Ambassador and the GC that he would stay involved with the environmental remediation program and ensure that all monies would be spent in accordance with UN requirements. Kuwait Public Authority for Assessment of Compensation(PAAC) Geneva representative Sabikah Al-Abdul Al-Razzaq told Ambassador that matters were progressing and that PAAC had made an inquiry to Hill in the past week seeking clarification of the structure of the Hill International consortium. ¶8. (C) Comment: Such behind the scenes machinations by losing business competitors are standard fare in the Kuwait business community and are likely the primary obstacle confronting Hill. This type of business counterattack often includes enlisting friendly MPs to attack the government for various forms of malfeasance. In addition, several recent oil sector projects, after being met by parliamentary complaints of corruption and mismanagement on the part of the Oil Ministry, have ultimately failed, at least partially, due to the unwillingness of the GOK to forcefully confront the parliamentary charges and resultant negative press stories. Here, the risk is that the GOK, facing the potential of additional public accusations, may again choose the path of least resistance and push the issue down the road by citing alleged imperfections in the contract or winning contractor which 'require' retendering of the project. Post will continue to monitor developments and raise the issue with the GOK as appropriate. End comment. ********************************************* ********* For more reporting from Embassy Kuwait, visit: visit Kuwait's Classified Website at: http://www.intelink.sgov.gov/wiki/Portal:Kuwa it ********************************************* ********* JONES