The world's at Bechtel's beck and call

From the rebuilding of Iraq to the Jubilee Line, the really big projects land in the lap of an American company that is as secretive financially as it is well connected politically

On 20 December 1983, Donald Rumsfeld arrived in Baghdad to meet Iraqi president Saddam Hussein and his deputy, Tariq Aziz. Then Ronald Reagan's special envoy to the Middle East, Mr Rumsfeld was on a friendly mission to get the peace process going in the Lebanon.

But another subject was raised during the two-and-a-half-hour meeting with what are now two of the world's most wanted men. Previously classified documents, compiled by US think-tank the Institute for Policy Studies (IPS), reveal that Mr Rumsfeld also outlined plans for a huge pipeline, running from Iraq to the Gulf of Aqaba in Jordan, which would have safeguarded oil supplies to the West.

Less than a month earlier, the US State Department, then headed by George Shultz, had selected a company to carry out this $1bn (£640m) project: Bechtel Corporation. But it didn't seem to matter that Mr Shultz was a former Bechtel executive. "Out of public view, he pushed the pipeline project on behalf of his former company," says an IPS report into the affair. The project was eventually rejected by Saddam.

It seems to matter even less that Mr Shultz, having retired from politics, is back on the board of his old firm, which on Friday won the first contract, worth $680m, to rebuild the Iraq that was blitzed into submission by Mr Rumsfeld's army and air force.

Welcome to the private life of one of the best-connected, most powerful and most secretive companies in the world.

Bechtel's tentacles extend deep into the corridors of power. "For a top job at Bechtel, former military personnel, ex-diplomats and retired politicians need apply," says one former employee, who asked not to be identified. Bechtel's ties with the American intelligence service, through its network of associates, has earned it the nickname "the working arm of the CIA" and spawned a thousand conspiracy theories. "Some say the firm is a 'shadow government'," says one website, which goes on to claim that former Bechtel officers are part of a US cult.

But the company's political leverage has also got more level-headed commentators worried. Jim Vallette, author of the IPS report, says: "We are seeing US foreign policy being taken over by large corporations. Companies like Bechtel are ahead of the queue."

The fact that Bechtel is involved in some of the world's largest construction and engineering projects does little to quell these concerns. The 105-year-old company, which employs 47,000 people, helped to build the Hoover Dam and the Yucca Mountain nuclear store (both in Nevada in the US), as well as the Channel Tunnel Rail Link. It even extinguished blazing Kuwaiti oil fields after the last Gulf war.

The San Francisco-based group is headed by Riley Bechtel, the fourth generation of the family to run the privately owned company since it was founded to build railroads in the American West. Bechtel's power structure is determined simply by how close executives are to the 49-year-old billionaire.

Bechtel's corporate culture is tough, serious, hard-working and aggressive. As a result, engineers are highly regarded, extremely well-paid and are often brought in to sort out tricky projects that have started to go wrong.

Bechtel does, however, have a large blot on its copybook. In 1985 it was commissioned to design and manage the construction of a $3.5bn underground transport network in Boston, known as the "Big Dig". Costs have ballooned and are now estimated to be $14.8bn. Construction is still continuing.

Bechtel, along with the Massachusetts state authority and transport experts Parsons Brinckerhoff, has come in for serious criticism. In 2000 a Federal taskforce said the trio had "repeatedly and deliberately" failed to disclose the true cost of the project. In the same year, the chairman of the Senate committee on transport, Senator John McCain, said the project had suffered from "gross mis-management".

This hasn't stopped the British Government embracing Bechtel with open arms. The Channel Tunnel Rail Link, the Jubilee Line extension and the Limehouse Link in London's Docklands are three of Bechtel's successes. More recently it has been brought in to sort out the West Coast Main Line; it has become a member of the consortium taking over part of the London Underground; and it has been hired to advise the new Nuclear Decommissioning Authority.

Between 1999 and 2002 Bechtel gave almost $1.3m in campaign donations in the US, mainly to the Republicans, according to the Washington-based Center for Responsive Politics. In the UK, Bechtel's political links are harder to spot. According to the annual report and accounts of Bechtel Holdings filed at Companies House, the company made no political donations in 2000.

Chuck Redman, who heads Bechtel's operations in Europe, has no obvious connections to UK politics. Before joining Bechtel in 1996, he spent 22 years with the US State Department as special ambassador to Sweden and Germany and as an envoy to Yugoslavia and Haiti.

The only British director of Bechtel Holdings is Sir John Jennings, the former chairman of Shell. His contacts in the oil industry are understood to be highly valued by Mr Redman.

A senior adviser to the Government says: "Bechtel has skills that the UK doesn't have. Project managing big, complex projects is bread and butter for Bechtel. We are not very good at that in the UK. Bechtel gets results by throwing highly skilled people at problems. They are not always the easiest people to deal with – you wouldn't want to go out for a drink with them after work. But they get the job done."

Many Bechtel staff working from its two London bases in Hammersmith and the City are Americans. The company has a culture of moving home-grown engineers to projects rather than hiring locally. "The Americans are very expensive. Their wages are six times those of the UK equivalent," says one former employee. "That's why you'll find so many Bechtel employees living in Belgravia."

The fees that Bechtel charges are a closely guarded secret. The Department of Trade and Industry refuses to say how much it is paying the company for its work on nuclear decommissioning, insisting that it is "commercially sensitive information". However, it is understood that Bechtel has committed 10 executives to the two-year project, who will charge a daily rate for their time.

Despite these sorts of lucrative contracts, the latest accounts for Bechtel Holdings, covering the year to 31 December 2001, show that it made a £38.1m loss (although this doesn't cover recent projects such as nuclear decommissioning). The accounts also reveal that during that year the division received £8.4m from its parent company.

It is impossible to get any further information about Bechtel's finances because it is a private company. Some construction industry sources say that Bechtel uses this to its advantage. If a project goes financially wrong then Bechtel can keep this to itself; no current or future client ever need know if there have been problems. Couple this with its formidable network of contacts at the very top of the political tree, and it isn't hard to see why Bechtel was the first company the US government turned to for the rebuilding of Iraq.