Iraq in Transition
 Rebuilding Iraq Proves to Be A Gold Mine for Middlemen Ex-Soldiers,
 Diplomats Open Doors And Broker Deals in Chaotic Region
  by Greg Jaffe of the Whore Street Journal

DUBAI, United Arab Emirates -- Mac McClelland did some quick math as he
steered his Lincoln Navigator through chaotic Dubai traffic.

He'd just learned of a contract to supply food to 12,500 U.S. soldiers in
Iraq. If he won it, he'd be a subcontractor to a subcontractor on a deal
that originally went to Kellogg, Brown & Root, which provides support
services to the military overseas.

"Twelve thousand five hundred mouths," he mused. "That's about 40,000
meals a day." He figured if he could clear 10 cents profit on each meal,
he could make as much as $4,000 a day. "That's real money," he said to himself.

Rebuilding Iraq will take billions of dollars, and dozens of
entrepreneurs such as Mr. McClelland are angling for a share of that
money. These businesspeople -- mostly retired military or diplomatic
personnel who spent their careers in the Middle East -- act as middlemen
for hire. They do everything from rounding up local suppliers for construction
projects to helping companies set up branch offices in the region.

Mr. McClelland, a retired Marine Corps major, figures he's got three
dozen deals cooking right now related to Iraq reconstruction. In the past
month, he's rounded up local companies to bid on a contract to supply
automobiles to the new Iraqi police force. He's signed on as a consultant
to help 3M Co. and a company that makes X-ray-scanning equipment break
into the Iraq market. And he's set up a deal with a scrap-metal company
based in Houston that wants to bid for the remains of Iraqi tanks blown
up by U.S. bombs. On the side, the 47-year-old Mr. McClelland is trying
to persuade some key members of the royal family here to let him organize
a Dubai jazz festival -- the U.A.E.'s first.

Mr. McClelland describes himself as a "bit player" in the Iraq gold rush.
But even for the bit players, there's the potential for big money. "If 10% of
the projects come through, I'll have made enough to retire twice over," he says.
A couple of big ones, such as the food contract, could make his year.

Middlemen and go-betweens with strong military contacts always appear
wherever there's a war and wherever there's money to be made supplying
the U.S. armed forces. What makes Iraq different is the size of the
rebuilding effort the U.S. has taken on and the huge number of U.S. troops
involved. The U.S. government is spending several billion dollars a month on
troop support, fuel, equipment and, to a lesser extent, reconstruction.

Rather than bid out each individual project, the U.S. government has
awarded large contracts to a handful of corporations, including Bechtel
Group Inc. -- which won a $680 million deal to coordinate the rebuilding
effort -- and Halliburton Corp.'s Kellogg, Brown & Root, which has taken
in about $425 million of U.S. Army work, much of it related to supporting
troops with food and housing in Iraq and the Gulf. Those big players then
offer hundreds of subcontracts to other companies. Bechtel, for instance,
is subcontracting about 90% of its work.

Seal of Approval

Because Iraq is too unstable for large-scale rebuilding projects, the
first subcontracts aren't huge by corporate standards -- they mostly
involve housing and feeding troops, and getting basic infrastructure back
up and running. But they're valuable in another way, says Frances Cook, a
former U.S. ambassador to Oman who formed the Phoenix-Iraq Consortium in
Dubai to help Arab companies get their own piece of the rebuilding
effort. With so much competition for the early subcontracts, she says,
winning an early deal is a kind of "Good Housekeeping Seal of Approval."

"It means you are vetted and gives you a presence inside Iraq," says Ms.
Cook, whose firm's current clients are a medical business owned by a
prominent Saudi family, as well as three major construction companies in
Egypt and Oman.

But competing for subcontracts can be messy and confusing, even for big
corporations with decades of experience in the U.S. Between mid-April and
late May, Bechtel officials say, they received about 87,000 inquiries
from companies eager to get into Iraq. When the company held a
subcontractor conference in Kuwait City in late May, "about half of Dubai
showed up," says Horst Hoeller, the managing director of 3M's Gulf
operations, who attended the conference.

Companies such as 3M hope middlemen can help them cut through the chaos.
At war's end, the Minneapolis-based industrial giant, which has an office
in Dubai, wanted to open another in Baghdad. The plan: to solicit business --
offering everything from construction materials to office products -- directly
from big contractors and to a lesser extent the military. But the company
quickly decided the Iraqi capital was too dangerous.

Instead, it decided to hunt for subcontracts at the Bechtel conference.
Executives needed someone savvy who could guide them through the process
and get them close to important military and corporate officials. So they
tapped Mr. McClelland, who attended church with Dr. Hoeller's assistant.

Mr. McClelland supplied the company with the names of 15 senior military
contracting officers in Kuwait, the U.A.E., Oman and Qatar. Mr. McClelland
also gave 3M a list of names of local executives from companies such as Bechtel;
Kellogg, Brown & Root and military-supply firm DynCorp, many of whom are
former officers Mr. McClelland served with in the Gulf. Soon after Dr. Hoeller
arrived in Kuwait for the Bechtel conference, he met a senior military officer,
one of Mr. McClelland's contacts, who complained about a lack of Post-It
notes in Iraq. Within days, the military had put in an order for Post-Its,
electrical tape and multimedia projectors.

Dr. Hoeller estimates Iraq could soon generate as much business for 3M as
Saudi Arabia, his largest Middle East market, although he declines to be more
specific. The St. Paul, Minn., company, he says, "is going to make good money in Iraq."

Middlemen also are crucial to the cottage industry of consulting firms that have
sprung up in Washington and the Middle East to guide companies through the
Iraq contracting maze. In late May, Joe Allbaugh, the national campaign manager
for President Bush in 2000, and Ed Rogers, a senior official in the Reagan and
first Bush White Houses, put together one such firm, New Bridge Strategies LLC.

"We can take people to the Pentagon" and the Agency for International
Development, Mr. Rogers says. "But to do it right, you need people who
know the Middle East and people who are there all the time." One of the
firm's first moves was to team up with Leigh Gribble, a retired Naval
officer whose last post was at the U.S. embassy in Kuwait City, where he
advised the Kuwaiti navy on weapons purchases.

For these retired military officers in the Gulf, the sudden crush of
business couldn't have come up at a better time. Last year, business in
the Middle East virtually stopped. Nobody wanted to invest in a region
where a chemical or biological attack seemed like a real possibility.
"Absolutely nothing was happening out here," says Mr. Gribble, 47.

He moved back to Rhode Island with his wife and children to sit out the
war. When the fighting was finished, he and his wife decided it was time
to introduce their young kids, who had spent their lives in Kuwait, to
American culture. But he saw business opportunities back in the Middle
East, so he asked his wife to give him two years in Iraq on his own.

Bright Future

"She recognizes the opportunity," says Mr. Gribble, who returned to
Kuwait in early June and plans to go into Iraq this week to scout
business. "The future looks pretty damn bright right now."

Before Mr. McClelland went into business for himself, he was the
political adviser to the admiral who runs the U.S. Navy's Central
Command, which oversees naval operations in the Middle East and Central
Asia. He retired in 1996 and worked as a general manager overseeing
Middle East operations for Enron until that company imploded.

Right after Sept. 11, 2001, he pitched himself as a security consultant,
drafting evacuation plans for the Middle East offices of companies such
as Gillette. He did seminars on Marine Corps leadership tactics and in
his spare time coached his son's baseball team. He says he even convinced
the Crown Prince of Dubai to donate land to build four baseball diamonds.
The young ballplayers lost their previous fields when the owner evicted
them to protest U.S. policy in the Middle East.

Mr. McClelland landed his first big Iraq deal in the run-up to the war
when he got a tip, from an old Oman embassy colleague, about an Air Force
base that DynCorp was building near Dubai. Eager to move quickly, DynCorp
decided to subcontract out much of the work to local companies in the U.A.E.

Within two days, Mr. McClelland had lined up a half-dozen local
businesses to provide essentials such as food, toilets, showers,
generators and gravel at the base. Less than 24 hours later he had won a
subcontract to provide more than 50 separate services to the base.

Why didn't DynCorp, a unit of Computer Sciences Corp., which sells
information-technology products to the federal government and private
companies, just find the suppliers on its own? "Mac is a superstar," says
John Thomas, program manager for DynCorp in Oman. "He has so many
contacts, when we don't know our way around in a place [like the U.A.E.],
he can get things done quick."

Mr. McClelland won't disclose how much he made from the deal, but says,
"It was the best month I've ever had." And it led to other business.

A few weeks later, Mr. McClelland wrangled an invite to a meeting of U.S.
military officers and contractors held weekly at the U.S. embassy in Jordan.
The former Marine, who speaks fluent Arabic, had gone through language
training in Tunis with the defense attache at the embassy who organized the meeting.

At the Jordan meeting, Mr. McClelland learned the Army had tapped Kellogg,
Brown & Root to quietly set up a Special Forces base in Jordan for the coming
war in Iraq. Shortly after the meeting, Mr. McClelland contacted one of his clients,
Aggreko LLC, a British company that rents generators. A few days later Aggreko
landed a contract to supply generators to power the base.

Since then, Mr. McClelland has bid on a contract to supply 250 diesel trucks and
SUVs to Kellogg, Brown & Root for use in Afghanistan. He learned about that deal
from a Kellogg employee who attends his church in Dubai. A few weeks later,
he submitted a bid on a contract to provide more than 500 cars and trucks to
DynCorp, which has the contract to help rebuild the Iraqi police force. He discovered
that deal while on a one-week consulting stint in Oman for DynCorp. In both cases,
he teamed up with local auto dealers in the Emirates that he met while working in
Bahrain at Navy Central Command.

The dealerships could bid on the contracts by themselves. But without Mr.
McClelland, they likely wouldn't learn about the deals, which frequently
aren't broadly advertised. And Mr. McClelland provides another service.
"I am an American, veteran-owned business. That helps when you're doing
business with the U.S. military," he says. Neither of the two car
contracts has been awarded yet.

In addition to chasing his own deals, Mr. McClelland has corporate
consulting contracts that will bring him steadier paychecks. Sometimes
those deals bear other fruit. One executive at a prospective client,
supply-giant W.W. Grainger, recently called him about the big catering
contract in Iraq. "Do you know anyone who can feed 10,000 to 12,500
people a day in Iraq?" the executive asked.

The executive had run into a representative from a U.S. company in Kuwait
that had subcontracted to set up temporary bases for U.S. troops in Iraq.
Now that subcontractor needed help finding someone who could do the
catering at the base and had the necessary security certifications from
the military. Grainger didn't do that kind of work. "I've done catering
and I'm certified," Mr. McClelland said.

Racing to a meeting with 3M on a separate matter, Mr. McClelland called
the catering company that had helped him provide meals to the Air Force
base in the U.A.E. Within 24 hours he had put together a proposal. About
a week ago he learned he had won the deal. The first meals are due in
Iraq on June 27.

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