It's a Bechtel World

Think that a $680 million Iraq contract is a big deal? You don't know Bechtel.

Even Bechtel's charitable gifts, through the Bechtel Foundation, seem related to business, often going to the universities with engineering schools that accept and then graduate Bechtel employees. The foundation has also given $3 million to charities in countries where the company has projects.

Riley Bechtel's grandfather, Stephen D. Bechtel, once famously said that his company was as much about making money as it was constructing things. Because Bechtel is a private company, the firm's books are out of public view, but the Bechtel fortune is an industry -- and a power -- unto itself.

In 1986, Bechtel spun off its Bechtel Investments subsidiary into a separate corporation called the Fremont Group, headed by Alan Dachs, Riley Bechtel's brother-in-law. Board members include Riley Bechtel, Stephen Bechtel Jr., Shultz, Dachs, Cordell Hull (a retired Bechtel executive and board member distantly related to Franklin Roosevelt's secretary of state of the same name), and Harold J. Haynes, a Bechtel board member and former chairman of Standard Oil Company of California.

A decade later, the firm began investing money for clients other than Bechtel; as The New Yorker magazine reported earlier this year, Osama bin Laden's estranged family, with whom Bechtel has had construction business in Saudi Arabia, was among those clients. Fremont, according to its Web site, currently has $11 billion in assets. Its real estate arm, Fremont Properties, owns some 4 million square feet of commercial real estate, including the 23-story Bechtel Building, five other office buildings in San Francisco, and IBM's Internet division headquarters in Somers, N.Y.

During the past several years, Bechtel has expanded its role into that of shareholder in several projects. Through its Bechtel Enterprises, the firm finances construction and other jobs in exchange for an ownership stake. The result, often, is Bechtel's effective privatization of public infrastructure, something that has garnered the firm a great deal of criticism.

For instance, a Bechtel partnership is improving the Jorge Chávez International Airport in Lima, Peru, and holds a contract to operate the airport for 30 years. In a similar sort of contract, the same partnership has taken over operations of Costa Rica's San Jose International Airport. Another Bechtel public-private partnership is building and modernizing rail lines in and around London, where Bechtel and its partners will operate parts of the rail lines.

By far the most infamous scenario, however, involves a water system in Cochabamba, Bolivia. Three years ago, Bechtel took over the public water system in an improvement project that the government could not otherwise afford. But the result was that water rates rose beyond what Cochabamba's citizens could pay, leaving many without water and sparking violent riots. Bechtel was eventually forced to leave the project, and has filed a $25 million claim against the Bolivian government in a World Bank court. The move prompted demonstrations in front of Bechtel's San Francisco headquarters and helped lead, politically, to the demise of a contract with San Francisco to refurbish the city's Hetch Hetchy water system.

Certainly, Bechtel has weathered its share of negative publicity. In fact, the company's work as contractor of a major project to build the Central Artery, commonly known as "the Big Dig," to replace the central highway in Boston is under investigation for significant cost overruns. The company's work supporting the government's nuclear power plants over the years also hasn't earned it points in liberal political circles. A relatively new project, undertaken with defense contractor Lockheed Martin Corp., to manage parts of a new ballistic missile defense test site near the Marshall Islands for the U.S. Department of Defense has likewise drawn some negative attention.

At the same time, Bechtel has achieved the vision of its early leaders -- to be the company that can build anything, anywhere, any time. Like it or not, there really are only a few companies that can build an industrial city in a Middle Eastern country, or create a $20 billion airport complex from the ground up, or erect a refinery in the dead of winter in a former Soviet-bloc country.

Depending on ideology, one could view the company as either a shining success or a horrific monster. But it can't be seen as a rogue firm playing outside the rules, because Bechtel is the textbook example of business as usual.

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