Democrats warn of 'profiteering' in reconstruction contracts

The Bush administration and major US firms are facing fresh charges of "profiteering" from the Iraq war after allegedly inflating the costs of key contracts.

The accusations from Tom Daschle, the Democrat Senate leader, came after his staff uncovered evidence of the "gold plating" of cost estimates for dozens of contracts.

The controversy has highlighted the White House's growing problems in persuading a deeply sceptical Congress to release an extra $87bn (£52bn) for Iraq and, in part, Afghanistan - in addition to the $79bn it approved in April.

Meanwhile, the US's main allies, including the EU, Japan and some Arab countries, are balking at President Bush's attempts to raise $35bn in financial support and are thought instead to be offering no more than $1bn.

Congress has been told that the White House needs nearly $20bn for non-military spending, such as health, education and civilian policing. But many US politicians have accused the White House of failing to justify the high costs involved, and suggested the fees charged by the main US civilian contractors in Iraq, such as Halliburton - which used to be run by Vice President Dick Cheney - and DynCorp, should come under intense scrutiny.

The contracts uncovered by Senator Daschle's office include $3.6m for 400 handheld radios and 200 satellite phones - averaging $6,000 per item. The White House also wants to spend $10,000 a month per student on business school tuition - double the fees for Harvard Business School.

Congress has also been asked to approve spending $100m on protecting 100 Iraqi families, costing an average of $200,000 per family member whereas the US federal witness protection programme costs $10,000 per person per year. Another $400m is being sought to build and run two new prisons in Iraq to hold a total of 4,000 inmates. This will in effect cost $50,000 a prisoner, nearly twice the cost of each high-security prison place in the US.

Ranit Schmelzer, a spokeswoman for Senator Daschle, said these costs had to be contrasted with the pressing need for increased public spending in the US itself. "Senator Daschle believes there needs to be transparency in this contract bidding," she said.

The Democrats are planning to vote against many contract applications when the new appropriations bill comes back to Congress on 14 October, she added.

Dr Ian Davis, director of the British American Security Information Council, a military think-tank based in London and Washington, said: "This is the sort of outrageous 'gold-plating' normally associated with military procurement contracts. It is unlikely to encourage a sceptical international community to come to the donor table."

Another Democrat, Senator Edward Kennedy, has alleged that the White House is secretly using part of these funds to "bribe" foreign leaders to send troops to Iraq. He said the Congressional Budget Office could account for only $2.5bn of the $4bn spent every month in Iraq.