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C O N F I D E N T I A L SECTION 01 OF 02 TRIPOLI 000595 
 
SIPDIS 
 
DEPT FOR NEA/MAG; COMMERCE FOR NATE MASON 
 
E.O. 12958: DECL:  7/23/2018 
TAGS: ECIN ECON EINV ETRD EWWT KCOR PGOV LY
SUBJECT: A COMMERCIAL CAUTIONARY TALE: BECHTEL'S BID FOR SIRTE PORT PROJECT FALLS FLAT  

CLASSIFIED BY: John T. Godfrey, CDA, U.S. Embassy - Tripoli, Dept of State. REASON: 1.4 (b) 

¶1. (C) Summary:  An unsuccessful year-long bid by U.S. firm Bechtel to build a commercial port in the Libyan city of Sirte has shed light on how decisions about large foreign investment projects in Libya are made.  Bechtel's bid went through several evolutions, including signing a memorandum of understanding with the Prime Minister and a resolution by Libya's Cabinet-equivalent to give the company the contract.  In the end, the contract evaporated after apparent late-innings intervention by senior regime figures.  Despite a year's worth of effort, $1 million worth of expenses, numerous high-level visits, and formal decisions by the GOL to bless the contract, the company's efforts were ultimately unsuccessful, underscoring the fact that Libya's much-trumpeted bidding process is less than transparent, and that the GOL's formal structures do not have the final word on major foreign investment projects.  The fact that an operator with Bechtel's savvy and deep pockets was ultimately unable to secure its contract serves as a cautionary tale for the many U.S. and western companies seeking to enter Libya's booming market.  End summary.  

PROMISING BEGINNINGS ...  

¶2.  (C) U.S. engineering and consulting giant Bechtel has just declared as dead a year-long attempt to secure a $1 billion cost-plus contract to build a commercial port in the Libyan city of Sirte.  Bechtel began its pursuit of the Sirte port contract in July 2007, when senior Bechtel representative Charles Redman (strictly protect), former U.S. Ambassador to Germany, arrived in Tripoli for discussions at the invitation of the Qadhafi Development Foundation (QDF), a quasi-governmental entity headed by Saif al-Islam al-Qadhafi, son of Muammar al-Qadhafi.  During the initial visit, QDF representatives encouraged Bechtel to bid on several small infrastructure projects so the company could "prove itself".  Redman made it clear that Bechtel wanted, but did not need, business in Libya and had a record that spoke for itself.  Eventually, QDF representatives invited Bechtel to execute two projects: a new commercial port facility at Sirte and management of an industrial city adjacent to the Ras Lanuf oil facility.  The QDF proposed that Bechtel partner with the Libyan Economic and Social Development Fund (ESDF) to execute the Sirte Port project.  

¶3. (C) This initial burst of positive energy dissipated over the next six months.  Bechtel slowly made progress on a contract for the Sirte port project, but its relationship with General People's Committee (GPC) for Transportation, its primary interlocutor on the deal (apart from the QDF), became increasingly difficult.  This primarily manifested itself in a lack of responsiveness on facilitation of visas for Bechtel representatives, prompting Bechtel to seek support from other quarters of the Government of Libya (GOL) to facilitate travel by its negotiators and technical staff.  In November 2007, then Deputy Foreign Minister Muhammed Siala remarked publicly during a visit to Washington that Bechtel would not secure the Sirte port contract if Secretary Rice failed to visit Libya by year's end.  

LEAD TO HIGH-PROFILE COMMITMENTS  

¶4. (C) After months of go-slow negotiations, Bechtel experienced an apparent breakthrough in February, when Redman received an urgent call from Minister of Transportation Elmabruk, who asked that the company's team be in Sirte on February 25 to "sign the contract".  Although the company was still in the midst of conducting a laborious due diligence review of the contract (key provisions of which had not been finalized), they were convinced to rush a delegation to Sirte in time for a signing event.  At that event, Prime Minister al-Baghdadi al-Mahmoudi and Bechtel signed a memorandum of understanding (MOU) committing the two sides to finalizing the contract as soon as possible.  In addition, the General People's Committee (Cabinet-equivalent) issued Decision #158 on March 3, which was effectively an announcement of contract terms that granted permission to the GPC for Transportation to sign a contract with Bechtel. Following these public steps by the GOL, Bechtel reported that the GPC for Transportation appeared to be working in earnest to finalize an English-language version of the contract.  

RADIO SILENCE BROKEN BY BAD NEWS FROM SAIF AL-ISLAM'S INTERMEDIARY  TRIPOLI 00000595  002 OF 002    

¶5. (C) With expectations running high that a final deal was imminent, Bechtel pressed on with negotiations and a fully-vetted contract was presented to the Transportation Minister in early May.  From that point on, all communication with the QDF, GPC for Transportation and Libyan Ports Authority (another key player in the deal) went dead.  Sensing that something was amiss, Bechtel representatives continued to inquire about that status of the contract, but received no response.  On July 14, Abdulhakim el-Ghami, described as "an intermediary for a person very close to Saif al-Islam", called Redman to inform him that the port project had been canceled. (Note: Redman told us el-Ghami, who is based in Munich, appears to be a key conduit for Saif al-Islam's dealings with foreign companies.  End note.) Bechtel received no explanation as to why the contract was cancelled, but el-Ghami encouraged the company to "seriously consider" undertaking a different, unspecified infrastructure development project.  

¶6. (C) Comment: Bechtel's experience throws into stark relief the fact that economic and commercial decisions ostensibly finalized by even the most senior levels of the GOL can be overturned by influential elements operating outside the formal government structure.  Libyan officials have made much of recent measures designed to ensure transparency and predictability in bids for commercial contracts; however, the reality is that contracts of any size, particularly those involving foreign companies, are subject to intense maneuvering by regime insiders jockeying to ensure that they company they happen to champion wins the prize.  Bechtel's story also reinforces post's understanding of Saif al-Islam's key as a principal gatekeeper for large foreign investment projects in Libya, a process he manages through the QDF and the National Engineering Services and Supply Company (NESSCO - further details will be reported septel).  The silver lining in this tale of woe is that Bechtel's power division has been awarded a project management job for construction of a new power plant outside Sirte; however, the sorry denouement of the company's efforts to secure the Sirte port contract have dampened its for seeking any new major projects in Libya in the near future and should serve as a cautionary tale for other U.S. companies considering major investment projects here.  . GODFREY