Efforts to fix facilities founder. Hundreds of millions of dollars are lost as fields deteriorate.
By T. Christian Miller
Times Staff Writer
September 26, 2005
QARMAT ALI, Iraq — The failure to rebuild key components of Iraq's petroleum industry has impeded oil production and may have permanently damaged the largest of the country's vast oil fields, American and Iraqi experts say.
The deficiencies have deprived Iraq of hundreds of millions of dollars in potential revenue needed for national rebuilding efforts and kept millions of barrels of oil off the world market at a time of growing demand.
Engineering mistakes, poor leadership and shifting priorities have delayed or led to the cancellation of several projects critical to restoring Iraq's oil industry, according to interviews with more than two dozen current and former U.S. and Iraqi officials and industry experts.
The troubles have been compounded in some cases by security issues, poor maintenance and disputes between the U.S. and its main contractor, Houston-based KBR, a subsidiary of Halliburton Corp., according to the interviews and documents.
Despite the United States' spending more than $1.3 billion, oil production remains below the estimated prewar level of 2.5 million barrels per day and well below a December 2004 goal of up to 3 million barrels per day.
Interviews and documents from whistle-blowers show problems with at least three projects deemed crucial to Iraq's oil production:
• Qarmat Ali water treatment plant. This massive pumping complex is needed to inject water into Iraq's southern oil fields to aid in oil extraction. Under a no-bid contract, KBR was instructed to repair the complex at a cost of up to $225 million, but not the leaky pipelines carrying water to the fields. As a result, the water cannot be delivered reliably, raising concerns that some of Iraq's oil may not be recoverable.
• Al Fathah pipelines. As part of the same no-bid contract, the U.S. gave KBR a job worth up to $70 million to rebuild a pipeline network in northern Iraq despite concerns that the project was unsound. In the end, KBR built fewer than half the pipelines, and the project was given to another contractor. The delay has aggravated oil transport problems, which have forced Iraq to inject millions of barrels of oil back into the ground, a harmful practice for the oil fields and the environment. A government audit is being conducted based on a complaint by a whistle-blower.
• Southern oil well repairs. A $37-million project to boost production at dozens of Iraqi oil wells was canceled after KBR refused to proceed without a U.S. guarantee to protect it from possible lawsuits.
It is striking that although the reconstruction of the northern oil infrastructure has been hampered by security issues, the southern oil fields — which account for most production — have been attacked only a few times since the conflict in Iraq began but still face serious problems.
After the 2003 invasion, U.S. officials and KBR moved swiftly, resuming oil production only a month after the war began and slowly increasing output. But after matching the prewar peak of 2.5 million barrels a day in September 2004, production declined to about 2.2 million barrels daily last month.
If the U.S. had successfully completed the planned repairs, Iraq could be producing up to 500,000 additional barrels a day, according to some estimates.
The difference would add up to more than $8 billion a year — money that the Iraqi government could use for new schools and hospitals, to supplant U.S. reconstruction spending and improve the Iraqi security forces that Washington hopes will replace American troops.
U.S. reconstruction officials acknowledged the delays but said the efforts had turned a corner and that despite the contract disputes, they were satisfied with KBR's performance. The company avoided a possible cancellation of its contract this year after addressing problems associated with cost estimates. The U.S. also has brought in an Australian-American firm to finish several projects started by KBR that had been delayed.
"Overall, reconstruction is moving forward," said Bob Todor, the senior U.S. advisor to Iraq's Oil Ministry. "Like everything else, it took longer than everyone expected."
KBR officials, meanwhile, said their work reflected the orders they had been given by U.S. reconstruction officials. The rebuilding, they said, takes place under difficult conditions, especially in the north.
"KBR can't emphasize enough that it performs all work at the direction of the U.S. government," spokeswoman Melissa Norcross said in an e-mailed response to questions. "We only do what we are tasked to do."
Current and former Iraqi oil officials expressed disappointment, frustration and anger at the U.S. performance.
They said that rather than tapping Iraqi state oil company officials, the U.S. program was overseen by American officials with little experience in the oil industry. In an interview, one senior U.S. official managing part of the restoration effort jokingly described his knowledge level as "Oil for Dummies."
Iraqi officials also said KBR relied too heavily on foreign contractors, conducted lengthy, unnecessary studies and failed to deliver promised equipment. They acknowledged that Iraq needed to spend more on its oil industry but wondered why the U.S. investment had not had more of an effect.
"They need to speed it up a bit," said Ibrahim Bahr Uloum, the Iraqi oil minister, in an interview. "There's great work to be done in all these fields."
Other Iraqis said that the U.S. and KBR simply failed to deliver. "I think we had the worst quality of U.S. service, staff and companies," said Jaafar Altaie, who was a senior planner at the Oil Ministry and now works with Amman-based Tabouk Energy Group, a consulting firm. "We had maximum rhetoric and minimum results on the ground."
Only weeks after the U.S.-led invasion in March 2003, the U.S. hired KBR under a no-bid contract to repair the Qarmat Ali water treatment plant, a complex of twisting pipes and rusting metal that sits in the middle of drab, flat desert a few miles north of Basra in southern Iraq.
Both the United States and Iraq considered the water treatment plant a high priority. Oil rises from the ground in southern Iraq because of natural pressure in the sands. As the oil surges out, the pressure declines, making extraction more difficult.
*
Oil and Water
To counter the problem, the Iraqis inject water into the earth to maintain the pressure in the oil field. That water, however, must be first cleaned at Qarmat Ali so that particles or bacteria don't plug up the holes in the soil that allow the oil to rise.
By August 2004, KBR had completed most repairs at the plant, which had badly deteriorated during 12 years of sanctions and because of the looting that followed the U.S.-led invasion. KBR rebuilt motors, refurbished pumps and installed electrical generators and chlorination and anti-corrosion systems.
But when KBR opened the taps to send the treated water to Iraq's legendary Rumaila oil field, the deteriorated pipes were unable to handle the increased pressure. The pipeline burst repeatedly, delaying work for weeks on end, KBR and U.S. Army Corps of Engineers officials said. In the five months ending December 2004, KBR managed to send water through the pipes for only 29 days. Even today, the plant delivers only about a third of its capacity.
To make matters worse, farmers tapped into the pipeline, using it to irrigate their fields. KBR found one local who was watering his entire tomato crop courtesy of the Qarmat Ali pipeline.
Despite the problems, the U.S. never assigned KBR the task of repairing the aging lines. Todor, the U.S. oil advisor, said that by the time the problem became apparent, most of the money available in the south had already been committed to other projects.
The Iraqis, meanwhile, have not invested in repairs, using most of their oil revenue for fuel subsidies and salaries.
"The Iraqis have not had the money to do the work," Todor said.
On a recent tour of the sprawling, decades-old complex, its decrepit state was obvious. The walls were cracked; motors, valves and pipes were rusted. Dirt and mud covered the floors.
Only two of the five pumps that KBR fixed were operating. An Iraqi engineer said a machine to add cleaning chemicals to the water was unusable. Another system to protect the interior of the pipelines from rust was not being used for fear that the anti-corrosion additive would damage the oil fields.
Neither the U.S. nor KBR have provided additional maintenance or operating funds to the plant since turning it over to the Iraqis. For their part, the Iraqis said KBR had installed substandard equipment and had not provided sufficient training.
"It's useless. We have material from KBR, but we don't have documents on how to use it," said the Iraqi engineer, who requested anonymity because of security concerns.
KBR said it had done all that was asked of it.
"KBR is not responsible to support with the ongoing maintenance and repair of these facilities unless tasked to do so" by the U.S. government, said Stephanie Price, another KBR spokeswoman, in response to questions sent by e-mail. "To date, most of the follow-on problems at [Qarmat Ali] have stemmed from the overall age of the equipment and the availability of spare parts."
A big part of the problem, some U.S. officials said, was the Army Corps of Engineers, which oversaw initial repairs under the Restore Iraqi Oil project. The Corps, which had little experience in the oil industry before the war, was forced to rely on advice from KBR and other experts in making rebuilding decisions.
Bunnatine Greenhouse, who was the top contracting official in the Corps, sharply criticized its involvement at a congressional hearing in June. "The Corps had absolutely no competencies related to oil production," said Greenhouse, who also criticized the no-bid contracts awarded to KBR. She was demoted in August. The end result of the U.S. investment here is that Qarmat Ali still does not produce enough water to be used for injection into the oil fields, nor can the water reliably be delivered to the injection stations, which also remain in need of repair.
That means that every day, Iraq forgoes about 200,000 barrels of oil — or about $11 million in revenue at current Iraqi crude prices, according to Iraqi and U.S. officials. A joint venture formed by Australian firm WorleyParsons Ltd. and Pasadena-based Parsons Corp. was recently brought in to complete the work that KBR began.
The lack of reliable water injection has led to a debate about whether Iraq's southern oil fields have been permanently damaged. Although nobody is sure, some oil experts fear that America's failure to fix the problems has worsened damage that may have occurred during Saddam Hussein's rule.
United Nations oil experts have told the U.S. government that some oil reservoirs in southern Iraq have been so badly managed that the Iraqis will be able to recover only between 15% to 25% of the oil, well below the industry standard of 35% to 60%, a recent Department of Energy report states.
Norm Szydlowski, a U.S. consultant to the Iraqi Oil Ministry, said that the Iraqis had begun an in-depth study of the health of their fields, the first in years.
The possibility of damage "was and is a focus. It is a significant concern," Szydlowski said. "The extent of the potential damage is really unknown. The Iraqis prudently have been working at this stage of the game as quickly as they can to get the right analysis of their reservoirs."
But some said the U.S. and Iraq needed to work harder, especially on fixing Qarmat Ali.
"It's frustrating. You've got one of the biggest fields in the world that's sitting there and needs some help," said one contractor familiar with the project who asked not to be named. "It's like your favorite pet dog got hurt and you want to help it."
The status of reservoirs elsewhere in Iraq is also a concern. Once an oil well begins production, it is difficult to shut it down. But attacks on pipelines in the north are so frequent that the Iraqis can't export the oil, nor do they have enough capacity to store it.
As a result, when oil production backs up, the Iraqis are forced to pump the oil back into the ground — a practice widely condemned in the industry because the re-injected oil, which is thicker, can plug fissures through which the petroleum flows. Iraq puts almost 200,000 barrels of oil per day back into the ground — meaning that Iraq's net production is even lower than the official figure of 2.2 million barrels.
"Once you have damaged the fields, there is almost nothing you can do about it. I have a great worry that we are not too far from it," said Farouk Kasim, an Iraqi oil expert, at a conference in London this summer. "The last two years have been a nightmare."
*
Al Fathah
The pipelines at Al Fathah bridge became one of the nightmares of the reconstruction effort.
A squat concrete and steel structure over the Tigris River in northern Iraq, the bridge was bombed by U.S. jets during the 2003 invasion. The attack knocked out a stretch and destroyed a network of oil and gas pipelines that ran underneath.
The 16 pipelines were a crucial part of Iraq's deteriorating oil infrastructure, moving crude and other petroleum products from northern wells around Kirkuk to Baiji, a dusty refinery town south of the bridge.
The Army Corps of Engineers decided it would be quicker to run the pipelines under the riverbed instead of repairing the bridge. The agency ordered KBR to drill under the river despite warnings against such a route, said a Corps contracting official involved in the project. The official asked to remain anonymous, fearing retaliation from commanders.
Trouble began soon after the project started in January 2004. The soil was unstable, and a borehole drilled to hold the pipes collapsed. In an e-mail obtained by The Times, the contracting official described the project as "placing a pipe in a large box of marbles."
The project, originally envisioned to take 10 weeks, turned into a nearly yearlong job. As the months went by, the cost soared. In the end, KBR managed to install six of the sixteen pipelines originally planned. Although the Corps said it still had not determined the final cost of the project, one source said it might approach $88 million. KBR defended the project, saying that "unforeseen" subsurface conditions had resulted in "technical challenges." They also noted that the horizontal drilling needed to install the pipelines below the riverbed had never been done in Iraq, requiring the importation of new equipment.
"KBR ultimately completed six of the drill lines and installed six of the pipelines when [the Army Corps] decided to stop work on the project due to funding limitations at the time," Price, the KBR spokeswoman, wrote.
Todor, the advisor to the Oil Ministry, said neither the Army Corps nor KBR anticipated the poor soil conditions. KBR and Army Corps officials said they were unaware of any study warning against the pipeline plan.
"In hindsight, maybe you would have done things differently," Todor said.
In February this year, the U.S. reassigned the pipeline crossing to the joint venture led by WorleyParsons. When the project is completed, Iraq will be able to increase exports and stabilize a system that has suffered constant attack by insurgents in the region around the bridge. Increased flow also will mean that Iraq will have to inject less oil back in the ground around its northern fields.
Two years after the project was first proposed, a senior U.S. official said the fully restored pipeline network would be completed this fall.
*
The Wells
Another crucial aspect to restoring Iraq's oil production have been "well work-overs" — cleanup jobs that can improve the productivity of oil wells.
The Project and Contracting Office, a government reconstruction agency, wanted KBR to perform 30 work-overs on wells in southern Iraq for $37 million.
Negotiations got bogged down over KBR's demand that the U.S. indemnify it in case of lawsuits arising from the work, a senior U.S. official said.
KBR insisted on the guarantee, saying that indemnity was provided by governments worldwide. The U.S. said that only the Iraqi government, as a sovereign nation, could give such protection. In July, the two sides reached an impasse and the U.S. terminated the project, according to a statement. Other companies approached by U.S. officials also refused to take on the project without indemnification.
The U.S. has now decided to use the $37 million to train Iraqis to do the work-overs. At stake: an estimated increase of 300,000 barrels of oil per day.
"Indemnification was a big problem. For a lot of companies, it was a stumbling block," said a senior U.S. official overseeing the work-over project. "Our schedule, though behind, should get a lot better now."
*
Broken Promises
Such promises ring hollow to Iraqis, who are frustrated with the U.S. and KBR. Abdul Raof Ibraheem is a manager at one of Iraq's largest refineries. His massive complex of rusting metal spheres is nearly silent these days. KBR is supposed to be supplying parts to fix the plant. But the firm recently told Ibraheem that the worldwide spending boom in oil infrastructure had made it hard to purchase the required equipment. The parts will arrive perhaps by next summer, KBR officials told him.
Ibraheem said he had expected more.
"Frankly speaking, I am not satisfied with KBR's work. What I saw from KBR, their performance is not what we had expected. We heard a lot about KBR, but we're not satisfied.
"The results have meant nothing for us."
Monday, September 26, 2005
Friday, September 23, 2005
HoustonChronicle.com - Auditors investigate Katrina contracts
Halliburton, Bechtel deals not clearly defined
By HOPE YEN
Associated Press
WASHINGTON - Government auditors are questioning whether several multimillion-dollar Katrina contracts — including one involving a subsidiary of Houston-based Halliburton Co. — invite abuse because they are open-ended and not clearly defined.
The contracts, for services such as levee repair and emergency housing, were granted to companies based on their pre-existing business relationships with the government. Critics say the arrangements foster cronyism because a few repeat players typically get the best deals. The Government Accountability Office and the Homeland Security Department, which has primary responsibility for reviewing the billions of dollars worth of Katrina contracts, said they will focus on agreements awarded with little or no competition.
They include "indefinite delivery-indefinite quantity" contracts such as those involving Halliburton Co. subsidiary KBR and Bechtel Corp. Both firms have strong ties to the Bush administration.
"We've been looking at all the contracts from day one," said Richard Skinner, the Homeland Security Department's inspector general. "One concern is whether you are getting the fair market value. The second is whether the people we are giving contracts to are the best qualified."
Of the 22 contracts awarded so far by the Army Corps of Engineers, 11 are so-called ID-IQs; so are several granted by the Federal Emergency Management Agency.
One such contract is a $16 million government work order given to the subsidiary of Halliburton, the company headed by Vice President Dick Cheney from 1995 to 2000 that has been accused of overcharging the government for work in Iraq. The deal, to plug levee breaches, was awarded as part of a Navy construction contract.
Previous government audits have cited these contracts as vulnerable to abuse because government officials and companies can exploit their broadly defined terms, such as services.
"We want to make sure agencies have processes and procedures in place to ensure contracts are performed as required," said Bill Woods, a director at the GAO, the investigative arm of Congress.
"Things can slip through the cracks."
Other targets include an agreement with Bechtel Corp. for short-term housing that was awarded without competition. The company, whose CEO Riley Bechtel served on President Bush's Export Council from 2003-04, began providing work even though a formal contract with cost and payment provisions has yet to be signed.
Bechtel spokesman Howard Menaker said the company was asked to provide an immediate supply of trailers and mobile homes in the Gulf Coast based on Bechtel's "long and accomplished history in emergency response."
By HOPE YEN
Associated Press
WASHINGTON - Government auditors are questioning whether several multimillion-dollar Katrina contracts — including one involving a subsidiary of Houston-based Halliburton Co. — invite abuse because they are open-ended and not clearly defined.
The contracts, for services such as levee repair and emergency housing, were granted to companies based on their pre-existing business relationships with the government. Critics say the arrangements foster cronyism because a few repeat players typically get the best deals. The Government Accountability Office and the Homeland Security Department, which has primary responsibility for reviewing the billions of dollars worth of Katrina contracts, said they will focus on agreements awarded with little or no competition.
They include "indefinite delivery-indefinite quantity" contracts such as those involving Halliburton Co. subsidiary KBR and Bechtel Corp. Both firms have strong ties to the Bush administration.
"We've been looking at all the contracts from day one," said Richard Skinner, the Homeland Security Department's inspector general. "One concern is whether you are getting the fair market value. The second is whether the people we are giving contracts to are the best qualified."
Of the 22 contracts awarded so far by the Army Corps of Engineers, 11 are so-called ID-IQs; so are several granted by the Federal Emergency Management Agency.
One such contract is a $16 million government work order given to the subsidiary of Halliburton, the company headed by Vice President Dick Cheney from 1995 to 2000 that has been accused of overcharging the government for work in Iraq. The deal, to plug levee breaches, was awarded as part of a Navy construction contract.
Previous government audits have cited these contracts as vulnerable to abuse because government officials and companies can exploit their broadly defined terms, such as services.
"We want to make sure agencies have processes and procedures in place to ensure contracts are performed as required," said Bill Woods, a director at the GAO, the investigative arm of Congress.
"Things can slip through the cracks."
Other targets include an agreement with Bechtel Corp. for short-term housing that was awarded without competition. The company, whose CEO Riley Bechtel served on President Bush's Export Council from 2003-04, began providing work even though a formal contract with cost and payment provisions has yet to be signed.
Bechtel spokesman Howard Menaker said the company was asked to provide an immediate supply of trailers and mobile homes in the Gulf Coast based on Bechtel's "long and accomplished history in emergency response."
Monday, September 19, 2005
BostonHerald.com - Business News: Halliburton, set to clean up, denies overcharges
By Brett Arends
Monday, September 19, 2005
Politically-wired Halliburton Inc. is denying it overbilled the U.S government in Iraq – just three months after a Pentagon report showed $422 million in ``unsupported'' costs in the company's contracts.
The company, which is in line for Federal work helping rebuild New Orleans and the Gulf Coast, also responded to scrutiny of its CEO's growing fortune by taking the unusual step of highlighting the share option gains of an executive at a rival firm.
Halliburton has been a target of Bush administration critics over its work in Iraq. Vice-President Dick Cheney ran the company from 1995 to 2000.
In an exclusive communication to the Herald, company communications director Cathy Mann said audits of Halliburton's $9 billion in Iraq contracts ``are part of the normal contracting process'' and their role ``is advisory only. Any claims that the figures contained in these audit reports are `overcharges' are uninformed and flat wrong.''
Her assertion comes just three months after the release of a Pentagon report which showed $1.03 billion in ``questioned'' costs and $422 million in ``unsupported'' costs in the company's Iraq contracts.
The Department of Defense Audit Agency, in a detailed review, criticized the company for failing to provide ``current, accurate, and complete data'' on the financials of its Iraq work, noting the error was so bad ``it decreases the government confidence in and reliance on the contractor estimating system.''
Halliburton, at the time, disputed many of the findings. But it admitted, in a submission to the Defense Contract Audit Agency in December 2003, that ``we did not use current, accurate or complete information that was available for pricing of subcontracts.''
In one instance, the Pentagon found ``an approximate $67 million overstatement of proposed costs'' in Halliburton's bill setting up and running military canteens in Iraq.
In reply, Halliburton's own director of government compliance, William R. Walter, agreed with the point but disputed the figure. ``(T)he difference between the proposed cost of total dining facility costs and the amount using the current, accurate and complete data provided was a total of $37 million,'' he wrote.
``There are many excuses and reasons available – but – in the end, KBR did not include the most current data in our proposal,'' he wrote to the Pentagon.
KBR is the Halliburton division involved in the Iraqi work.
The company's latest statement followed a Herald article last week about Halliburton's soaring stock price and the resulting paper profits made by CEO David Lesar.
Communications director Cathy Mann asked why no ``other energy services company or executive'' was cited in the analysis, adding: ``A review of public trading information for other energy services industry executives would have revealed that one Weatherford executive has exercised 446,839 shares since early September.''
Companies rarely point fingers at rivals, let alone at rival executives. Weatherford, like Halliburton and most of the big oil companies, is based in Houston, Tex.
Monday, September 19, 2005
Politically-wired Halliburton Inc. is denying it overbilled the U.S government in Iraq – just three months after a Pentagon report showed $422 million in ``unsupported'' costs in the company's contracts.
The company, which is in line for Federal work helping rebuild New Orleans and the Gulf Coast, also responded to scrutiny of its CEO's growing fortune by taking the unusual step of highlighting the share option gains of an executive at a rival firm.
Halliburton has been a target of Bush administration critics over its work in Iraq. Vice-President Dick Cheney ran the company from 1995 to 2000.
In an exclusive communication to the Herald, company communications director Cathy Mann said audits of Halliburton's $9 billion in Iraq contracts ``are part of the normal contracting process'' and their role ``is advisory only. Any claims that the figures contained in these audit reports are `overcharges' are uninformed and flat wrong.''
Her assertion comes just three months after the release of a Pentagon report which showed $1.03 billion in ``questioned'' costs and $422 million in ``unsupported'' costs in the company's Iraq contracts.
The Department of Defense Audit Agency, in a detailed review, criticized the company for failing to provide ``current, accurate, and complete data'' on the financials of its Iraq work, noting the error was so bad ``it decreases the government confidence in and reliance on the contractor estimating system.''
Halliburton, at the time, disputed many of the findings. But it admitted, in a submission to the Defense Contract Audit Agency in December 2003, that ``we did not use current, accurate or complete information that was available for pricing of subcontracts.''
In one instance, the Pentagon found ``an approximate $67 million overstatement of proposed costs'' in Halliburton's bill setting up and running military canteens in Iraq.
In reply, Halliburton's own director of government compliance, William R. Walter, agreed with the point but disputed the figure. ``(T)he difference between the proposed cost of total dining facility costs and the amount using the current, accurate and complete data provided was a total of $37 million,'' he wrote.
``There are many excuses and reasons available – but – in the end, KBR did not include the most current data in our proposal,'' he wrote to the Pentagon.
KBR is the Halliburton division involved in the Iraqi work.
The company's latest statement followed a Herald article last week about Halliburton's soaring stock price and the resulting paper profits made by CEO David Lesar.
Communications director Cathy Mann asked why no ``other energy services company or executive'' was cited in the analysis, adding: ``A review of public trading information for other energy services industry executives would have revealed that one Weatherford executive has exercised 446,839 shares since early September.''
Companies rarely point fingers at rivals, let alone at rival executives. Weatherford, like Halliburton and most of the big oil companies, is based in Houston, Tex.
Tuesday, September 13, 2005
Investigators to Monitor Katrina Contracts - Yahoo! News
By LARA JAKES JORDAN, Associated Press Writer
Tue Sep 13, 4:05 PM ET
A team of investigators is being sent to the Hurricane Katrina-ravaged Gulf Coast to follow the money — namely, billions of dollars in relief aid the federal government is pouring into the region without normal contracting safeguards.
The 30 Homeland Security Department investigators and auditors are part of what officials call an unprecedented effort to ensure federal funds are properly distributed in a rescue, relief and rebuilding process expected to exceed $100 billion.
The team is being dispatched to monitor government contractors' work in Alabama, Louisiana and Mississippi as critics call the spending deluge a disaster in waiting if not properly controlled.
"The message has gone out very clearly to everybody that we're going to be efficient, we're going to cut through red tape, but we're not going to cut though the laws," Homeland Security Secretary Michael Chertoff said Tuesday.
Yet many of the normal safeguards have been temporarily suspended in Katrina's wake to ensure emergency federal aid gets to victims as soon as possible. So far, Congress has approved spending $62 billion in Katrina-related relief efforts. Of $50 billion directed to the Federal Emergency Management Agency, an arm of Homeland Security, just over $9 billion has so far been spent, FEMA spokeswoman Natalie Rule said.
"It is entirely appropriate that the money go out just as quickly as possible to people whom we think need it, and to worthy contractors on a competitive basis," said former Homeland Security inspector general Clark Kent Ervin. "But in the rush to do it, there is real potential for waste and certainly for fraud as well."
Congress also let federal employees temporarily charge up to $250,000 on government credit cards for hurricane rescue and relief operations. Guidelines issued Tuesday by the White House budget office said the new spending authority will go only to select individuals, and many purchases will require prior approval.
Some contracts, including five with emergency housing and construction companies, were awarded hurriedly without undergoing normal competitive bidding processes. Meanwhile, the Bush administration has waived prevailing wage requirements that ensure government-contracted workers in disaster areas are fairly compensated.
Among the most controversial Katrina awards is one that the Homeland Security team cannot investigate: a $16.6 million contract with Kellogg, Brown & Root Services Inc. of Arlington, Va., for emergency repairs at Gulf Coast naval and Marine facilities. The money is part of a $500 million Navy contract that KBR won by competitive bid last July.
Because the Pentagon awarded the KBR contract, Homeland Security has no authority to audit it. But KBR, a subsidiary of Halliburton Co., has been at the center of scrutiny for receiving a five-year, no-bid contract to restore Iraqi oil fields shortly before the war began in 2003. Vice President Dick Cheney headed Halliburton from 1995 to 2000, and Democrats have questioned whether the company has gotten favorable treatment because of his connection.
"Congress is rightly spending billions of dollars to help the people and businesses of the Gulf Coast who have been devastated by Hurricane Katrina," House Democratic leader Nancy Pelosi said. Over the weekend she called for an independent commission to oversee relief contracts "to ensure taxpayers' money goes to those in need, not to fraudulent contractors."
The Homeland Security investigators are part of a $15 million effort by the department's inspector general that Congress approved last week to keep an eye on Katrina relief spending.
Department officials believe the money represents the first time emergency funds have been set aside for FEMA or Homeland Security's internal watchdogs to monitor relief spending. Even investigations into contracts after the Sept. 11, 2001, terror attacks were paid for out of FEMA's relatively meager budget for internal audits.
"However, Katrina costs will be far greater than those costs associated with the federal response/recovery for 9/11," said Homeland Security Inspector General Richard Skinner, who ran FEMA's internal watchdog unit after the terror attacks.
A spokesman for Bechtel Corp. said he did not know how much the San Francisco-based engineering and construction company won to provide emergency housing to hurricane victims in southern Mississippi. But he said Bechtel was still negotiating its contract with FEMA, even after it began relief efforts around Sept. 1.
Generally, Katrina contractors "will be given the benefit of the doubt," Senate Appropriations Committee Chairman Sen. Thad Cochran (news, bio, voting record), R-Miss., said.
FEMA spokesman James McIntyre put it more bluntly: "You had 200,000 people who were displaced, possibly more," he said Monday. "We needed to get families into housing, as soon as possible, and off the floor of the stadium. "We needed the contracts to hit the ground running to get that process up and running."
___
Tue Sep 13, 4:05 PM ET
A team of investigators is being sent to the Hurricane Katrina-ravaged Gulf Coast to follow the money — namely, billions of dollars in relief aid the federal government is pouring into the region without normal contracting safeguards.
The 30 Homeland Security Department investigators and auditors are part of what officials call an unprecedented effort to ensure federal funds are properly distributed in a rescue, relief and rebuilding process expected to exceed $100 billion.
The team is being dispatched to monitor government contractors' work in Alabama, Louisiana and Mississippi as critics call the spending deluge a disaster in waiting if not properly controlled.
"The message has gone out very clearly to everybody that we're going to be efficient, we're going to cut through red tape, but we're not going to cut though the laws," Homeland Security Secretary Michael Chertoff said Tuesday.
Yet many of the normal safeguards have been temporarily suspended in Katrina's wake to ensure emergency federal aid gets to victims as soon as possible. So far, Congress has approved spending $62 billion in Katrina-related relief efforts. Of $50 billion directed to the Federal Emergency Management Agency, an arm of Homeland Security, just over $9 billion has so far been spent, FEMA spokeswoman Natalie Rule said.
"It is entirely appropriate that the money go out just as quickly as possible to people whom we think need it, and to worthy contractors on a competitive basis," said former Homeland Security inspector general Clark Kent Ervin. "But in the rush to do it, there is real potential for waste and certainly for fraud as well."
Congress also let federal employees temporarily charge up to $250,000 on government credit cards for hurricane rescue and relief operations. Guidelines issued Tuesday by the White House budget office said the new spending authority will go only to select individuals, and many purchases will require prior approval.
Some contracts, including five with emergency housing and construction companies, were awarded hurriedly without undergoing normal competitive bidding processes. Meanwhile, the Bush administration has waived prevailing wage requirements that ensure government-contracted workers in disaster areas are fairly compensated.
Among the most controversial Katrina awards is one that the Homeland Security team cannot investigate: a $16.6 million contract with Kellogg, Brown & Root Services Inc. of Arlington, Va., for emergency repairs at Gulf Coast naval and Marine facilities. The money is part of a $500 million Navy contract that KBR won by competitive bid last July.
Because the Pentagon awarded the KBR contract, Homeland Security has no authority to audit it. But KBR, a subsidiary of Halliburton Co., has been at the center of scrutiny for receiving a five-year, no-bid contract to restore Iraqi oil fields shortly before the war began in 2003. Vice President Dick Cheney headed Halliburton from 1995 to 2000, and Democrats have questioned whether the company has gotten favorable treatment because of his connection.
"Congress is rightly spending billions of dollars to help the people and businesses of the Gulf Coast who have been devastated by Hurricane Katrina," House Democratic leader Nancy Pelosi said. Over the weekend she called for an independent commission to oversee relief contracts "to ensure taxpayers' money goes to those in need, not to fraudulent contractors."
The Homeland Security investigators are part of a $15 million effort by the department's inspector general that Congress approved last week to keep an eye on Katrina relief spending.
Department officials believe the money represents the first time emergency funds have been set aside for FEMA or Homeland Security's internal watchdogs to monitor relief spending. Even investigations into contracts after the Sept. 11, 2001, terror attacks were paid for out of FEMA's relatively meager budget for internal audits.
"However, Katrina costs will be far greater than those costs associated with the federal response/recovery for 9/11," said Homeland Security Inspector General Richard Skinner, who ran FEMA's internal watchdog unit after the terror attacks.
A spokesman for Bechtel Corp. said he did not know how much the San Francisco-based engineering and construction company won to provide emergency housing to hurricane victims in southern Mississippi. But he said Bechtel was still negotiating its contract with FEMA, even after it began relief efforts around Sept. 1.
Generally, Katrina contractors "will be given the benefit of the doubt," Senate Appropriations Committee Chairman Sen. Thad Cochran (news, bio, voting record), R-Miss., said.
FEMA spokesman James McIntyre put it more bluntly: "You had 200,000 people who were displaced, possibly more," he said Monday. "We needed to get families into housing, as soon as possible, and off the floor of the stadium. "We needed the contracts to hit the ground running to get that process up and running."
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Sunday, September 11, 2005
The Observer | Business | Congress probes hurricane clean-up contracts
Oliver Morgan, industrial editor
Sunday September 11, 2005
The Observer
A powerful investigative agency of the US Congress is to investigate the award of contracts by the Bush administration for emergency and reconstruction work in the wake of Hurricane Katrina.
The Government Accounting Office, which monitors public spending, is to audit the contracts won by the US firms. Already contracts have been given for repairing New Orleans' flood levees, rebuilding naval facilities, providing temporary housing and removing debris.
Companies winning work include US contracting giants Bechtel and Halliburton. Halliburton, formerly headed by Vice President Dick Cheney, is facing questions for allegedly overcharging on work done in Iraq. The Department of Defense was criticised for awarding Iraq reconstruction contracts to these two companies without competition. Other groups include Fluor and Shaw Group, a Louisiana engineer. The move comes as leading congressional figures express concern over the contracting process.
California representative Henry Waxman, who led much of the investigation into the Iraq reconstruction contracts, says: 'The administration has an abysmal contracting record in Iraq. We can't afford to make the same mistakes again. We must make sure taxpayer funds are not wasted, because every dollar thrown away today is a dollar that is not available to hurricane victims and their families.' Contracts had to be awarded in 'full transparency'. He added the audit of the contracting was 'a very good first step'.
Bechtel has been asked by the Federal Emergency Management Agency to assess the need for, and then to provide, temporary 'trailer' housing in the hardest hit areas.
Halliburton is repairing damage to three naval bases under a logistical contract with the US nav
Sunday September 11, 2005
The Observer
A powerful investigative agency of the US Congress is to investigate the award of contracts by the Bush administration for emergency and reconstruction work in the wake of Hurricane Katrina.
The Government Accounting Office, which monitors public spending, is to audit the contracts won by the US firms. Already contracts have been given for repairing New Orleans' flood levees, rebuilding naval facilities, providing temporary housing and removing debris.
Companies winning work include US contracting giants Bechtel and Halliburton. Halliburton, formerly headed by Vice President Dick Cheney, is facing questions for allegedly overcharging on work done in Iraq. The Department of Defense was criticised for awarding Iraq reconstruction contracts to these two companies without competition. Other groups include Fluor and Shaw Group, a Louisiana engineer. The move comes as leading congressional figures express concern over the contracting process.
California representative Henry Waxman, who led much of the investigation into the Iraq reconstruction contracts, says: 'The administration has an abysmal contracting record in Iraq. We can't afford to make the same mistakes again. We must make sure taxpayer funds are not wasted, because every dollar thrown away today is a dollar that is not available to hurricane victims and their families.' Contracts had to be awarded in 'full transparency'. He added the audit of the contracting was 'a very good first step'.
Bechtel has been asked by the Federal Emergency Management Agency to assess the need for, and then to provide, temporary 'trailer' housing in the hardest hit areas.
Halliburton is repairing damage to three naval bases under a logistical contract with the US nav
Tuesday, September 06, 2005
Halliburton's KBR unit gets contract to repair Gulf Coast facilities - 2005-09-06
Halliburton Co.'s Kellogg Brown & Root subsidiary has begun work on a $500 million U.S. Navy contract for emergency repairs at Gulf Coast naval and marine facilities that were damaged by Hurricane Katrina, according to an Associated Press report.
KBR has been under fire for receiving a five-year, no-bid contract to restore Iraqi oil fields shortly before the U.S. went to war against Iraq in 2003.
The subsidiary, Kellogg, Brown & Root Services Inc. of Arlington, Va., won the competitive-bid contract last July to provide debris removal and other emergency work associated with natural disasters.
Jan Davis, a spokeswoman for the Naval Facilities Engineering Command, told AP that KBR will receive $12 million for work at Naval Air Station Pascagoula, Naval Station Gulfport and Stennis Space Center in Mississippi. The company will receive $4.6 million for work at two smaller Navy facilities in New Orleans and others in the South.
KBR has provided similar work after major disasters in the United States and abroad for more than 15 years, including in Florida after Hurricane Andrew.
AP added that Houston-based Halliburton (NYSE: HAL) has reported being paid $10.7 billion for Iraq-related government work during 2003 and 2004. Pentagon auditors have questioned tens of millions of dollars of Halliburton charges for its operations there.
KBR has been under fire for receiving a five-year, no-bid contract to restore Iraqi oil fields shortly before the U.S. went to war against Iraq in 2003.
The subsidiary, Kellogg, Brown & Root Services Inc. of Arlington, Va., won the competitive-bid contract last July to provide debris removal and other emergency work associated with natural disasters.
Jan Davis, a spokeswoman for the Naval Facilities Engineering Command, told AP that KBR will receive $12 million for work at Naval Air Station Pascagoula, Naval Station Gulfport and Stennis Space Center in Mississippi. The company will receive $4.6 million for work at two smaller Navy facilities in New Orleans and others in the South.
KBR has provided similar work after major disasters in the United States and abroad for more than 15 years, including in Florida after Hurricane Andrew.
AP added that Houston-based Halliburton (NYSE: HAL) has reported being paid $10.7 billion for Iraq-related government work during 2003 and 2004. Pentagon auditors have questioned tens of millions of dollars of Halliburton charges for its operations there.
Friday, September 02, 2005
Halliburton Watch - Halliburton gets Katrina contract, hires former FEMA director
WASHINGTON, Sept. 1 (HalliburtonWatch.org) -- The US Navy asked Halliburton to repair naval facilities damaged by Hurricane Katrina, the Houston Chronicle reported today. The work was assigned to Halliburton's KBR subsidiary under the Navy's $500 million CONCAP contract awarded to KBR in 2001 and renewed in 2004. The repairs will take place in Louisiana and Mississippi.
KBR has not been asked to repair the levees destroyed in New Orleans which became the primary cause of most of the damage.
Since 1989, governments worldwide have awarded $3 billion in contracts to KBR's Government and Infrastructure Division to clean up damage caused by natural and man-made disasters.
Earlier this year, the Navy awarded $350 million in contracts to KBR and three other companies to repair naval facilities in northwest Florida damaged by Hurricane Ivan, which struck in September 2004. The ongoing repair work involves aircraft support facilities, medium industrial buildings, marine construction, mechanical and electrical improvements, civil construction, and family housing renovation.
In March, the former director of the Federal Emergency Management Agency (FEMA), which is tasked with responding to hurricane disasters, became a lobbyist for KBR. Joe Allbaugh was director of FEMA during the first two years of the Bush administration.
Today, FEMA is widely criticized for its slow response to the victims of Hurricane Katrina.
Allbaugh managed Bush's campaign for Texas governor in 1994, served as Gov. Bush's chief of staff and was the national campaign manager for the Bush campaign in 2000. Along with Karen Hughes and Karl Rove, Allbaugh was one of Bush's closest advisers.
"This is a perfect example of someone cashing in on a cozy political relationship," said Scott Amey, general counsel at the Project on Government Oversight, a Washington watchdog group. "Allbaugh's former placement as a senior government official and his new lobbying position with KBR strengthens the company's already tight ties to the administration, and I hope that contractor accountability is not lost as a result."
KBR has not been asked to repair the levees destroyed in New Orleans which became the primary cause of most of the damage.
Since 1989, governments worldwide have awarded $3 billion in contracts to KBR's Government and Infrastructure Division to clean up damage caused by natural and man-made disasters.
Earlier this year, the Navy awarded $350 million in contracts to KBR and three other companies to repair naval facilities in northwest Florida damaged by Hurricane Ivan, which struck in September 2004. The ongoing repair work involves aircraft support facilities, medium industrial buildings, marine construction, mechanical and electrical improvements, civil construction, and family housing renovation.
In March, the former director of the Federal Emergency Management Agency (FEMA), which is tasked with responding to hurricane disasters, became a lobbyist for KBR. Joe Allbaugh was director of FEMA during the first two years of the Bush administration.
Today, FEMA is widely criticized for its slow response to the victims of Hurricane Katrina.
Allbaugh managed Bush's campaign for Texas governor in 1994, served as Gov. Bush's chief of staff and was the national campaign manager for the Bush campaign in 2000. Along with Karen Hughes and Karl Rove, Allbaugh was one of Bush's closest advisers.
"This is a perfect example of someone cashing in on a cozy political relationship," said Scott Amey, general counsel at the Project on Government Oversight, a Washington watchdog group. "Allbaugh's former placement as a senior government official and his new lobbying position with KBR strengthens the company's already tight ties to the administration, and I hope that contractor accountability is not lost as a result."
Thursday, September 01, 2005
Middle East Times - Halliburton-linked company stripped of Iran contract
August 24, 2005
TEHRAN -- A private Iranian oil company linked to the US oil giant Halliburton has lost a multimillion-dollar contract to drill for natural gas amid accusations that it won the deal through bribery, officials said on Tuesday.
"It was recognized that there was financial corruption by Oriental Oil Kish, so according to the law the decision was made to dismiss the company from its activities," National Iranian Oil Company (NIOC) official Mohammad Reza Moghaddam told the student news agency ISNA.
The $310-million deal was awarded in January, even though a US law introduced in 1996 threatens sanctions on both American and foreign companies investing more than $40 million in Iran's energy sector.
The managing director of Pars Oil and Gas Company (POGC) - the body that supervises the South Pars gas field in question - confirmed the report.
"We have sent the cancelation of the contract with Oriental Oil Kish to NIOC and we are awaiting the decision on a new contractor," Akbar Torkan said.
Another report said that a rival to Oriental Oil Kish, the state-run National Iranian Drilling Company, had been offered the contract.
In early January the POGC awarded the contract for drilling South Pars phases 9 and 10 to Oriental Oil Kish.
Iranian officials said at the time that Halliburton had not directly signed the contract but that it had offered its services via Oriental Kish.
Halliburton, once chaired by US Vice-President Dick Cheney, has also come under investigation in the United States for its dealings with Iran.
Iran, which is OPEC's second largest oil exporter, has the world's second largest gas reserves.
Phases 9 and 10 of South Pars, operated jointly by South Korean and Iranian companies, are expected to produce 50 million cubic meters (1.8 billion cubic feet) of natural gas, 80,000 barrels of condensates and 400 tons of sulfur a day.
Iran hopes to boost gas output from 110 billion cubic meters a year in 2000 to 292 billion cubic meters in 2010. Gas accounts for about one-third of Iran's domestic energy consumption.
TEHRAN -- A private Iranian oil company linked to the US oil giant Halliburton has lost a multimillion-dollar contract to drill for natural gas amid accusations that it won the deal through bribery, officials said on Tuesday.
"It was recognized that there was financial corruption by Oriental Oil Kish, so according to the law the decision was made to dismiss the company from its activities," National Iranian Oil Company (NIOC) official Mohammad Reza Moghaddam told the student news agency ISNA.
The $310-million deal was awarded in January, even though a US law introduced in 1996 threatens sanctions on both American and foreign companies investing more than $40 million in Iran's energy sector.
The managing director of Pars Oil and Gas Company (POGC) - the body that supervises the South Pars gas field in question - confirmed the report.
"We have sent the cancelation of the contract with Oriental Oil Kish to NIOC and we are awaiting the decision on a new contractor," Akbar Torkan said.
Another report said that a rival to Oriental Oil Kish, the state-run National Iranian Drilling Company, had been offered the contract.
In early January the POGC awarded the contract for drilling South Pars phases 9 and 10 to Oriental Oil Kish.
Iranian officials said at the time that Halliburton had not directly signed the contract but that it had offered its services via Oriental Kish.
Halliburton, once chaired by US Vice-President Dick Cheney, has also come under investigation in the United States for its dealings with Iran.
Iran, which is OPEC's second largest oil exporter, has the world's second largest gas reserves.
Phases 9 and 10 of South Pars, operated jointly by South Korean and Iranian companies, are expected to produce 50 million cubic meters (1.8 billion cubic feet) of natural gas, 80,000 barrels of condensates and 400 tons of sulfur a day.
Iran hopes to boost gas output from 110 billion cubic meters a year in 2000 to 292 billion cubic meters in 2010. Gas accounts for about one-third of Iran's domestic energy consumption.
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