Doing Business In Iraq: Part 1 Halliburton

Wednesday, July 06, 2005

The army has just awarded another $4.97 billion to Halliburton for support in Iraq. Add this new number to the $6.3 billion that Halliburton received for logistics support during the first two years of the war. These orders of business originate from a 10-year contract known as LOGCAP( Logistics Civil Augmentation Program) that was won by KBR (a subsidiary of Halliburton) in 2001 worth $12 billion.
KBR originally won this contract in 1992 but was stripped of it when the GAO (General Accounting Office) discoverd they had overcharged the Army for work in Bosnia. DynCorp was awarded the contract in 1997, but KBR won it back in 2001.
Why does a company that has recently been accused of $1.4 billion in bogus charges to the government keep receiving huge contracts? Seems this is not a new issue: Halliburton received over $2.2 billion in contracts during the Clinton administration for work in Kosovo. During this time Halliburton was charged with the same type of practices it is now being charged with in Iraq: overcharging for gasoline, supplies and food.
Why would the government keep doing business with a company that has repeatedly abused and overcharged on contracts? Well, dive a little deeper and this turns out to be a deeply imbedded problem in our government for over 30 years. KBR, the subsidiary of Halliburton, started in Texas in the 1940's. They managed to get a state dam project through the help of a Texas congressman named Lyndon B. Johnson.
Guess which company had the most contracts in Vietnam? Guess which company was investigated for overcharging the government? Once again, I ask why would the U.S. government keep doing business with such a company? Just for fun let's take a quick look at some other government contracts that Hallibuton has (these were contracts for the year 2003):
1. Camp Bondsteel and Camp Monteith-Kosovo=$829.2 million
2. Taszar airbase & Camp McGovern-Bosnia/Herzegovinia=$695.2 million
3. Incirlik airbase-Turkey=$100 million
4. Bagram & Kandahar airbase-Afghanistan=$52.2 million
5. Camp Able Century-Macedonia=$30.5 million
6. Camp Lemonier-Djibouti=$28 million
7. Training mission in Georgia=$25.1 million
8. Camp Stronghold Freedom-Uzbekistan=$22.1 million
In February of 2002 KBR had to pay out $2 million to settle a suit with the Justice Department. This suit alleged that the company defrauded the government during the 1990's by inflating project costs. A classic example of the ballooning costs was the GAO study showing that the KBR operation in Bosnia was estimated at $191.3 million when presented to Congress in 1996. A year later the cost was $461.5 million.
Last week the Pentagon confirmed a report saying the Defense Contract Audit Agency is questioning more than $1 billion of Halliburton's bills for work in Iraq under the LOGCAP contract. Finally, a report from last July by the Governmant Accountabilty Office found that the government could save $31 million in Kuwait if it did not do business through KBR.


Daedalus said...

What do you think about halliburton wanting to sell KBR? Trying to get rid of it before some Enron-like scandal ruins halliburton?

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