Wednesday, July 06, 2005

Halliburton's Higher Bill

Rising Costs Reflect Growing Demand for Firm's Services

By Griff Witte
Washington Post Staff Writer
Wednesday, July 6, 2005; D01



The Army has ordered nearly $5 billion in work from Halliburton Co. to provide logistics support to U.S. troops in Iraq over the next year, $1 billion above what the Army paid for similar services the previous year.

The new order, which comes despite lingering questions about the company's past billing, replaces an earlier agreement that expired last June but had been extended through this spring to ensure a continuous supply of food, sanitation, laundry and other logistical services for the troops, according to Linda K. Theis, an Army spokeswoman.

The new order does not change the nature of Halliburton's work, but the higher price tag does reflect the growing demand for the company's services as U.S. forces continue to battle a stubborn insurgency two years after the fall of Saddam Hussein.

The increased bill parallels ballooning overall costs in Iraq. President Bush said in March 2003 that combat in Iraq would cost about $60 billion. But the cost for military operations alone had hit $135.3 billion as of March 2005, according to the Office of Management and Budget. The price tag would be far higher if the costs to fund the Coalition Provisional Authority, reconstruction projects and intelligence operations were included.

Halliburton subsidiary Kellogg Brown & Root has received more money from the U.S. involvement in Iraq than any other contractor. The company has been a lightning rod for criticism by administration foes who think Halliburton's high-level connections -- most notably its former chief executive, Dick Cheney, who is now vice president -- may have given it undue influence in winning sole-source business.

Under the Army's previous order for logistics support, Halliburton was paid $6.3 billion for work during the first two years of the occupation, including $3.98 billion between the beginning of May 2004 and the end of May 2005. Under the new deal, Halliburton will receive $4.97 billion to support U.S. troops in Iraq until May 2006.

Both orders stem from a 10-year contract known as LOGCAP, which KBR won in a competitive bid in 2001. As of the beginning of June, the Army had obligated nearly $12 billion to the company under the logistic contract, the vast majority of it for work in Iraq.

The new order took effect two months ago but had not been made public. Theis, the spokeswoman for the U.S. Army Field Support Command, which oversees the contract, said that there was "not a conscious decision" to keep the new deal quiet but that her office had simply been too busy with other news.

Rep. Henry A. Waxman (D-Calif.), a vocal critic of Halliburton, said the Army should not be giving the company orders for more work at the same time it is citing the company for unreasonable bills. "The accountability vacuum at the Defense Department is costing the taxpayer dearly," Waxman said in a statement.

The Pentagon last week confirmed a report by congressional Democrats saying that the Defense Contract Audit Agency has questioned more than $1 billion of Halliburton's bills for work in Iraq under LOGCAP and an energy contract called Restore Iraqi Oil. Among the costs that Pentagon auditors questioned were $152,000 for movie rentals, $1.5 million for tailoring and two multimillion-dollar transportation bills that appeared to overlap.

Pentagon spokeswoman Lt. Col. Rose-Ann L. Lynch said that the questioned costs are not necessarily overcharges and that contracting officials have either resolved, or are in the process of resolving, most of the discrepancies.

Halliburton has said that questioning costs is part of the normal contracting process and that the company is doing all it can to support U.S. troops in a dangerous environment.

About seven months ago, the Army gave Halliburton a list of the services it wanted under the primary task order for the LOGCAP contract, Theis said. But the company estimated the cost of those services would top $10 billion a year, far above what the Army had budgeted. Army officials ended up paring down their list, and they reached agreement with the company on the $4.97 billion figure this spring.

The Army would not provide a copy of the task order without a Freedom of Information Act request. But a draft of the order was provided to The Washington Post by David Phinney, a correspondent for CorpWatch.org, a Web site that monitors contractor involvement in Iraq.

The LOGCAP contract is not the only way the Army can buy logistical services, but it has received heavy use at a time when the Pentagon is outsourcing many of its non-war-fighting functions. Some have questioned whether such reliance on a single contractor makes sense. In a report issued last July, the Government Accountability Office found that the government could save $31 million -- or 43 percent -- on food services at six locations in Kuwait if it bypassed LOGCAP and KBR, working instead through a subcontractor.

Halliburton said in January that it would try to sell KBR, citing in part the controversy surrounding the company's work. Halliburton spokeswoman Jennifer W. Dellinger said in a statement yesterday that "no timeline has been set for a separation of KBR, nor has a decision been made on what form any potential separation might take."

© 2005 The Washington Post Company

Audit questions $1.4b in Halliburton bills

Expenses at issue from Iraq contracts
By Rick Klein, Globe Staff | June 28, 2005

WASHINGTON -- Internal Pentagon audits have flagged about $1.4 billion in expenses submitted by Halliburton Co. for services the firm is providing in Iraq, charges that include $45 cases of soda, $100-per-bag laundry service, and several months preparing at least 10,000 daily meals for a US military base that the troops did not need and ultimately went to waste, according to a report released yesterday by congressional Democrats.

The Defense Contract Audit Agency, which reviews Pentagon contracting, identified $1.03 billion in Halliburton invoices that it questioned as excessive, and an additional $442 million in expenses the company reported that the agency deemed to be insufficiently documented, according to the report.

The report, which House and Senate Democrats made public yesterday, gives a broad overview of questionable costs racked up by the energy conglomerate once led by Vice President Dick Cheney. Federal officials have also probed allegations that Halliburton executives have run up costs by staying at top-of-the-line hotels in Kuwait, that they have paid too much to import fuel, and that they've prepared thousands more meals than they've served. The report categorizes allegations that previously had been anecdotal, and expands the scope of allegations of waste and financial malfeasance.

It's also the latest salvo in Democrats' long-running contention that Halliburton -- by far the largest private contractor working in Iraq -- has gotten favored treatment from the Bush administration despite overcharging the government.

''Whether the explanation is gross incompetence or deliberate malfeasance, the result is the same: The taxpayers are getting bilked," Representative Henry A. Waxman of California, the ranking Democrat on the House Government Reform Committee, said yesterday at a hearing Democrats held to highlight the report. ''This special treatment must end."

Cathy Mann, a spokeswoman for Houston-based Halliburton, said the $1.4 billion figure is a ''gross mischaracterization" of the expenses that are under review, since some of the discrepancies have already been resolved.

For example, Mann said, Halliburton and the Pentagon disagreed over a bill for food services, but resolved the matter in April. She said both sides ultimately agreed that Halliburton would get $145 million of $200 million that had been withheld over the dispute.

''The only thing that's been inflated is the political rhetoric, which is mostly a rehash of last year's elections," Mann said. ''Halliburton is taking care of our troops' needs so they can focus on the tasks at hand. . .Audits are part of the normal contracting process, and it is important to note that the auditors' role in the process is advisory only" to the other Pentagon agencies that award private contracts.

The audits surfaced in a joint report prepared by the Senate Democratic Policy Committee and the Democratic staff of the House Government Reform Committee. The audits were part of the Pentagon's normal contract review policy; Democratic lawmakers obtained them from whistle-blowers who thought the information should come to light, according to committee aides. The whistleblowers asked not to be identified.

Much of the money in question has not yet been paid to Halliburton, pending resolution of the concerns raised by auditors.

Halliburton has won a number of contracts -- some the Pentagon handed to them on a no-bid basis -- for military suppport, security and reconstruction work in Iraq, deals that could total as much as $18 billion. Divisions of the company are under contract to provide meals and logistical services for coalition troops, rebuilding Iraq's oil infrastructure, and purchasing equipment and supplies to help with the reconstruction of the country.

The contracts entitle the company to get full reimbursement for its costs from the government, in addition to a fee that is a percentage of those costs, an arrangement that critics say creates an incentive for the company to pad its bills.

Democrats cited numerous instances in the report of apparent double-charging for services and equipment, and seemingly excessive costs for basic materials like food, gasoline, and laundry.

A November report by the Army Audit Agency, another Pentagon review office, found that Halliburton contracts had nearly $10 million in ''duplicate costs" for cargo and freight equipment as well as instances where the company issued more paychecks for a project than the number of people working on it, and the purchase of $560,000 worth of unnecessary equipment. At one point, the company billed the government $152,000 to build a 10,000-title ''movie library," an expense auditors ultimately deemed excessive.

Rory Mayberry, a former food production manager for the Halliburton subsidiary Kellogg, Brown & Root, testified at the hearing that the company routinely overpaid for staples such as tomatoes and bacon by importing the food from Philadelphia instead of using local suppliers overseas and in the region. Mayberry said that in early 2004, the company ordered enough food to prepare 20,000 meals every day at one US base in Iraq even though it was serving only 10,000 of them a day.

''When I questioned these practices, the managers told me this needed to be done because KBR lost money in prior months, when the government suspended some of the dining-hall payments to the company," said Mayberry, who testified via videotape from Iraq, where he is now working for another private company.

Two employees of the fuel transport and security company Lloyd-Owen International, another private company, told lawmakers yesterday that while Halliburton paid a Kuwaiti company about $1.30 per gallon of gasoline to fill the tanks of its vehicles, other contractors paid as little as 18 cents per gallon.

Federal officials have launched investigations of portions of Halliburton contracts, most notably in a March indictment where the Justice Department accused a company official and a subcontractor of overcharging taxpayers by nearly $5 million.

Senate minority leader Harry Reid, Democrat of Nevada, said: ''The American taxpayers have simply been cheated. For every dollar that Halliburton gets in excess profits, these are jobs that cannot go to Iraqis who need them."

Rick Klein can be reached at rklein@globe.com.

© Copyright 2005 Globe Newspaper Company.

Pentagon releases Halliburton documents

(via the Hill)

In the wake of a subpoena threat, the Pentagon has started turning over to Congress documents related to Halliburton Corp.’s disputed billing under a $2.5 billion contract for Iraqi oil-site repairs and fuel imports.

Rep. Christopher Shays (R-Conn.), chairman of the House Government Reform Subcommittee on National Security, Emerging Threats and International Relations, intended to subpoena the Defense Department if the administration did not provide the long-requested documents.

Halliburton received the contract in 2003 without competition. The company is a major recipient of Development Fund for Iraq (DFI) money. DFI is the successor of the United Nations Oil-for-Food program.

The Pentagon has submitted documents related to the contract without a subpoena, a subcommittee aide said, and more documents are on the way. Subcommittee members objected to heavily redacted internal Defense Department audits provided to a U.N. board charged with monitoring the DFI program.

The audits found more than $200 million in questioned charges that Halliburton had passed to the government.

Pentagon officials said that the documents were redacted to protect the company’s proprietary information.

Roxana Tiron

Halliburton's Higher Bill

Rising Costs Reflect Growing Demand for Firm's Services

By Griff Witte
Washington Post Staff Writer
Wednesday, July 6, 2005; D01



The Army has ordered nearly $5 billion in work from Halliburton Co. to provide logistics support to U.S. troops in Iraq over the next year, $1 billion above what the Army paid for similar services the previous year.

The new order, which comes despite lingering questions about the company's past billing, replaces an earlier agreement that expired last June but had been extended through this spring to ensure a continuous supply of food, sanitation, laundry and other logistical services for the troops, according to Linda K. Theis, an Army spokeswoman.

The new order does not change the nature of Halliburton's work, but the higher price tag does reflect the growing demand for the company's services as U.S. forces continue to battle a stubborn insurgency two years after the fall of Saddam Hussein.

The increased bill parallels ballooning overall costs in Iraq. President Bush said in March 2003 that combat in Iraq would cost about $60 billion. But the cost for military operations alone had hit $135.3 billion as of March 2005, according to the Office of Management and Budget. The price tag would be far higher if the costs to fund the Coalition Provisional Authority, reconstruction projects and intelligence operations were included.

Halliburton subsidiary Kellogg Brown & Root has received more money from the U.S. involvement in Iraq than any other contractor. The company has been a lightning rod for criticism by administration foes who think Halliburton's high-level connections -- most notably its former chief executive, Dick Cheney, who is now vice president -- may have given it undue influence in winning sole-source business.

Under the Army's previous order for logistics support, Halliburton was paid $6.3 billion for work during the first two years of the occupation, including $3.98 billion between the beginning of May 2004 and the end of May 2005. Under the new deal, Halliburton will receive $4.97 billion to support U.S. troops in Iraq until May 2006.

Both orders stem from a 10-year contract known as LOGCAP, which KBR won in a competitive bid in 2001. As of the beginning of June, the Army had obligated nearly $12 billion to the company under the logistic contract, the vast majority of it for work in Iraq.

The new order took effect two months ago but had not been made public. Theis, the spokeswoman for the U.S. Army Field Support Command, which oversees the contract, said that there was "not a conscious decision" to keep the new deal quiet but that her office had simply been too busy with other news.

Rep. Henry A. Waxman (D-Calif.), a vocal critic of Halliburton, said the Army should not be giving the company orders for more work at the same time it is citing the company for unreasonable bills. "The accountability vacuum at the Defense Department is costing the taxpayer dearly," Waxman said in a statement.

The Pentagon last week confirmed a report by congressional Democrats saying that the Defense Contract Audit Agency has questioned more than $1 billion of Halliburton's bills for work in Iraq under LOGCAP and an energy contract called Restore Iraqi Oil. Among the costs that Pentagon auditors questioned were $152,000 for movie rentals, $1.5 million for tailoring and two multimillion-dollar transportation bills that appeared to overlap.

Pentagon spokeswoman Lt. Col. Rose-Ann L. Lynch said that the questioned costs are not necessarily overcharges and that contracting officials have either resolved, or are in the process of resolving, most of the discrepancies.

Halliburton has said that questioning costs is part of the normal contracting process and that the company is doing all it can to support U.S. troops in a dangerous environment.

About seven months ago, the Army gave Halliburton a list of the services it wanted under the primary task order for the LOGCAP contract, Theis said. But the company estimated the cost of those services would top $10 billion a year, far above what the Army had budgeted. Army officials ended up paring down their list, and they reached agreement with the company on the $4.97 billion figure this spring.

The Army would not provide a copy of the task order without a Freedom of Information Act request. But a draft of the order was provided to The Washington Post by David Phinney, a correspondent for CorpWatch.org, a Web site that monitors contractor involvement in Iraq.

The LOGCAP contract is not the only way the Army can buy logistical services, but it has received heavy use at a time when the Pentagon is outsourcing many of its non-war-fighting functions. Some have questioned whether such reliance on a single contractor makes sense. In a report issued last July, the Government Accountability Office found that the government could save $31 million -- or 43 percent -- on food services at six locations in Kuwait if it bypassed LOGCAP and KBR, working instead through a subcontractor.

Halliburton said in January that it would try to sell KBR, citing in part the controversy surrounding the company's work. Halliburton spokeswoman Jennifer W. Dellinger said in a statement yesterday that "no timeline has been set for a separation of KBR, nor has a decision been made on what form any potential separation might take."