For the first time, a major U.S. contractor has dropped out of the multibillion-dollar effort to rebuild Iraq, raising new worries about the country's growing violence and its...

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WASHINGTON — For the first time, a major U.S. contractor has dropped out of the multibillion-dollar effort to rebuild Iraq, raising new worries about the country’s growing violence and its effect on reconstruction.

Contrack International, the leader of a partnership that won one of 12 major reconstruction contracts awarded this year, cited skyrocketing security costs in reaching a decision with the U.S. government last month to stop work in Iraq.

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“We reached a point where our costs were getting to be prohibitive,” said Karim Camel-Toueg, president of Arlington, Va.-based Contrack, which had won a $325 million award to rebuild Iraq’s transportation system. “We felt we were not serving the government, and that the dollars were not being spent smartly.”

While a few companies and nonprofit groups have pulled out of contracts in Iraq because of security concerns, Contrack’s is by far the largest to be canceled to date, U.S. officials said. The move has led to fears that Iraq’s mounting violence could prompt other companies to consider pulling out, or discourage them from seeking work in Iraq, further crippling reconstruction.

U.S. reconstruction officials said the termination of Contrack’s contract, which had not been disclosed previously, would not hamper rebuilding. They said they plan to put the contract up for rebidding, a process that can take months.

Contrack’s partnership was supposed to construct new roads, bridges and transportation terminals in Iraq. It wound up only refurbishing a handful of train depots, company officials said.

Nonetheless, the company was paid about $30 million during the eight months it was under contract, mostly for site assessments and design work, company and U.S. officials said.

“It’s not a terrible loss,” said Amy Burns, spokeswoman for the Pentagon’s Iraq Project and Contracting Office.

But reconstruction experts say Contrack’s withdrawal might foretell trouble with other contractors.

“It’s a very bad sign,” said Michael O’Hanlon, a scholar at the Brookings Institution think tank in Washington, D.C. “If this is how other private companies are thinking, it’s a very bad potential warning.”