US embassy cable - 03ROME4975

UNCLAS  ROME 004975 
 
SIPDIS 
 
 
SENSITIVE 
 
FROM FODAG 
 
STATE FOR IO/FO - SWIGERT, IO/EDA, IO/T, IO/PHO, NEA/NGA, 
PRM 
USDA/FAS FOR U/S PENN, ETERPSTRA, MCHAMBLISS, RTILSWORTH AND 
LSCHATZ 
USAID FOR AA/DCHA WINTER, AA/ANE, D/DCHA/OFDA BMCCONNELL, 
D/DCHA/FFP LANDIS 
 
E.O. 12958:  N/A 
TAGS: EAID, EAGR, AORC, PREF, IZ, FAO, UN 
SUBJECT: FAO UPDATE ON IRAQ OIL-FOR-FOOD CONTRACTS 
 
REF:  (A) STATE 304499;  (B) ROME 4767, 
      (C) ROME 4393;     (D) ROME 4366 
 
Sensitive but unclassified - please protect accordingly. 
Not suitable for Internet posting. 
 
1.  (SBU)  Summary:  FAO officials report that, as of 
October 30, FAO has completed its work on 182 contracts 
(86 percent) out of the 211 contracts that were originally 
passed to FAO under Resolution 1483.  With a number of 
contracts very close to completion, they fully expect to 
surpass the 90 percent mark by November 3.  They point out 
that the Office of the Iraq Program (OIP) statistics 
reported ref A only count those contracts that FAO has 
amended and sent to OIP, but there are an additional 61 
contracts for which all possible FAO action has been 
completed, but which need not or cannot be amended, for 
reasons beyond FAO's control.  End summary. 
 
2.  (SBU)  FODAG delivered ref A demarche to FAO on October 
30.  In response to the information provided in ref A, the 
FAO officials involved in OFF contract processing indicated 
that the OIP information works off a data base that may be 
misleading, and is accurate only if one considers the total 
number of contracts under SC Resolution 1483 that were 
actually amended by FAO. 
 
3.  (SBU)  FAO offered the following accounting of the 
status of contract amendments: 
 
(a) 211 - Total number of contracts passed to FAO by OIP for 
amendment under SC Resolution 1483. 
 
(b) 121 - Number of contracts amended by FAO and sent to OIP 
(57.3 percent of the total). 
 
(c) 43 - Number of contracts closed.  Closed means either 
(1) by the time FAO received them all deliveries under the 
contracts had been completed and contracting actions 
completed, or (2) the suppliers had indicated to FAO that 
they had no interest in fulfilling or ability to fulfill the 
contracts.  In all these cases no amendment to the existing 
contract was needed or possible.  FAO has informed OIP of 
these contracts, but they apparently continue to appear on 
the list of contracts not acted upon by FAO (20.4 percent of 
the total). 
 
(d) 9 - Number of contracts in which there is an intractable 
fee dispute.  These are cases in which the suppliers refuse 
to agree to an amendment of their contracts reducing the 
cost by 10 percent.  (This was, FODAG understands, one of 
the tasks set FAO in the contract amendment process.)  FAO 
is not in a position to proceed with these contracts because 
the suppliers will not negotiate.  FAO says that OIP and the 
CPA have been informed of this.  Contracting action cannot 
take place on these contracts (4.3 percent of the total). 
 
(e) 5 - Number of contracts rejected on technical grounds. 
Four of these are for insecticides that pose environmental 
or handler risk, or which are not approved for use in Iraq, 
and one is for irrigation equipment.  These contracts have 
been discussed with the civilian advisors of the CPA and the 
Iraqi Ministry of Agriculture, and FODAG understands that 
these entities have agreed that the contracts should be de- 
prioritized.  FAO is awaiting written confirmation of this 
from the CPA and has informed OIP of the circumstances 
surrounding these contracts (2.4 percent of the total). 
 
(f) 4 - Number of contracts in which FAO has been unable to 
reach the suppliers.  FAO indicates that none of the contact 
points (phone, fax, telex, email, etc.) have worked for 
these firms and FAO has been unable to proceed with contract 
re-negotiation for lack of having someone with whom to 
negotiate.  FAO has tried to follow up through the embassies 
of the countries in which the suppliers are registered, to 
no avail.  FAO has informed the OIP and CPA of the status of 
these contracts and further action cannot be taken (1.9 
percent of total). 
 
(g) 11 - Number of contracts under active final negotiation 
with the suppliers and for which amendment finalization is 
expected shortly (5.2 percent). 
 
(h) 12 - Number of contracts in which amendment discussions 
are underway and FAO has asked for, and is awaiting, 
supplier final terms for final negotiation of amendments. 
Amendment is expected (5.7 percent). 
 
(i) 3 - Number of contracts in which all negotiations have 
been completed and FAO is awaiting supplier final signature 
of amended contract (1.4 percent of total). 
 
(j) 3 - Number of contracts for which technical 
specifications are being identified by CPA and FAO technical 
experts (1.4 percent of total). 
 
4.  (SBU)  The sum of contracts in paragraphs b through k is 
211.  It is apparent that the OIP percentage cited in ref A 
as representing total contract amendments completed includes 
only category b.  However, FAO officials maintain that this 
is not an accurate representation of where the contracting 
process stands.  Category c is one in which no action can or 
should be taken.  Categories d, e, and f are ones in which 
FAO cannot move forward with contract amendment.  These 
contracts -- for which amendment cannot be expected from FAO 
for reasons beyond their contracting control -- total 61. 
If one accepts that FAO has done on these contracts all that 
it is able in pursuit of amendment, then they are more 
appropriately placed in the "completed" column, making that 
percentage, as it stands on October 30, at 86 percent (121 
plus 61 out of 212 contracts). 
 
5.  (SBU)  If one accepts that categories g and i are near 
completion, then the total of completed contracts on 
November 3 would be 196.  This represents 92 percent of the 
total contracts to be amended.  FAO officials confirmed that 
they expect to have contract action completed on 90 percent 
by November 3, as they had previously indicated. 
 
6.  (SBU)  Contract category h is one that FAO expects to 
complete before the November 21 deadline, and it also 
intends to do so with category j, assuming the necessary 
information from outside bodies is available in time. 
 
7.  (SBU)  Comment:  FODAG hopes this accounting of FAO OFF 
contract amendments under the SC Resolution 1453 helps to 
keep the process of finalizing this program on track. 
 
8. (U) Minimize considered. 
 
HALL 
 
 
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 2003ROME04975 - Classification: UNCLASSIFIED