WASHINGTON -- Pentagon auditors found that Vice President Dick
Cheney's former company may have overcharged the Army by as much as
$61 million for gasoline in Iraq, senior defense officials said
Thursday.
Halliburton apparently didn't profit from the possible overcharges,
the officials said, speaking on condition of anonymity. The problem,
the officials said, was that Halliburton may have paid a
subcontractor too much for the gasoline in the first place.
The Pentagon officials said the Halliburton subsidiary involved in
Iraq reconstruction work, Kellogg, Brown & Root, also submitted a
proposal for cafeteria services that was $67 million too high. The
officials said the Pentagon rejected that proposal.
The defense officials said they had no reason to believe the problems
were anything other than ``stupid mistakes'' by Halliburton.
In an e-mail statement, Halliburton spokeswoman Wendy Hall denied the
company had overcharged. She said Halliburton was responding to
questions from Pentagon auditors and was ``confident our responses
will satisfy'' them.
News of the problems came as President Bush worked to justify his
decision to limit Iraq reconstruction contracts to companies from the
United States or countries that supported the war. The move angered
governments whose firms were cut out of the bidding process,
including France, Germany, Russia and Canada.
Many prominent Democrats also have criticized the Halliburton
contracts specifically, suggesting they were a political payoff for a
company with strong ties to the GOP and whose executives gave
generously to the Bush campaign.
Sen. Frank Lautenberg, D-N.J., on Thursday asked for Senate hearings
on the Pentagon's findings.
``I have long been troubled by the continued growth of the Pentagon's
no-bid contract with Halliburton, and the delay in the Pentagon's
promise to compete this contract competitively,'' Lautenberg wrote to
Senate Government Affairs Committee Chairwoman Susan Collins, R-Maine.
Cheney and Pentagon officials deny any political motive for awarding
the no-bid contracts to KBR, which has a long-standing relationship
with the military as a major Pentagon contractor.
Routine audits by the Defense Contract Audit Agency uncovered the
problems.
Pentagon officials said they were concerned about the problems with
KBR's contracts, which were awarded without competitive bidding for
up to $15.6 billion for rebuilding Iraq's oil infrastructure and
assisting U.S. troops there. About $5 billion has been spent or
obligated to spend on those contracts so far.
``Contractor improprieties and/or contract mischarging on department
contracts will neither be condoned nor allowed to continue,'' Dov
Zakheim, the Pentagon's budget chief, said Thursday.
The defense officials, who are involved in the audit of the
contracts, said the Pentagon was negotiating with KBR over how to
resolve the fuel-pricing issue. They declined to name the
subcontractor that provided the fuel, saying that company may not
have been notified of the inquiry's findings.
The possible overcharging involved 56.6 million gallons of gasoline
KBR supplied in Iraq from the end of the war until Sept. 30, the
Pentagon officials said. The officials said the KBR was charging
$2.27 a gallon for gasoline while another contract was for $1.18.
Democratic Reps. Henry Waxman of California and John Dingell of
Michigan had accused KBR of price-gouging for gasoline used in Iraq.
The Army is to open its KBR contracts to competitive bidding next
month. The contracts evolved from work to put out oilfield fires to
overseeing rebuilding of Iraq's oil infrastructure and providing fuel
for the country. KBR also provides support services to U.S. troops in
Iraq such as serving hot meals.
Halliburton has said it needs to charge a high price for fuel because
it must be delivered in a combat zone. Several KBR workers have been
killed or wounded in attacks by Iraqi insurgents.
The allegations of overcharging are not the first against KBR. Last
year, the firm paid $2 million in fines to settle charges it inflated
prices for repairs and maintenance at Fort Ord, Calif.
Congress' General Accounting Office found in 1997 and 2000 that KBR
had billed the Army for questionable expenses on its support
contracts for operations in the Balkans. Those reviews cited
instances such as charging $85.98 per sheet of plywood that cost
$14.06 and billing the Army for cleaning some offices up to four
times per day.
Cheney, a former defense secretary, stepped down as chief executive
officer of Halliburton when he became Bush's running mate in 2000 and
has said he played no role in contracts for his former company.
Cheney became head of the company in 1995.
Matt Kelley, Associated Press
Published December 12, 2003
Cheney's former company may have overcharged the Army by as much as
$61 million for gasoline in Iraq, senior defense officials said
Thursday.
Halliburton apparently didn't profit from the possible overcharges,
the officials said, speaking on condition of anonymity. The problem,
the officials said, was that Halliburton may have paid a
subcontractor too much for the gasoline in the first place.
The Pentagon officials said the Halliburton subsidiary involved in
Iraq reconstruction work, Kellogg, Brown & Root, also submitted a
proposal for cafeteria services that was $67 million too high. The
officials said the Pentagon rejected that proposal.
The defense officials said they had no reason to believe the problems
were anything other than ``stupid mistakes'' by Halliburton.
In an e-mail statement, Halliburton spokeswoman Wendy Hall denied the
company had overcharged. She said Halliburton was responding to
questions from Pentagon auditors and was ``confident our responses
will satisfy'' them.
News of the problems came as President Bush worked to justify his
decision to limit Iraq reconstruction contracts to companies from the
United States or countries that supported the war. The move angered
governments whose firms were cut out of the bidding process,
including France, Germany, Russia and Canada.
Many prominent Democrats also have criticized the Halliburton
contracts specifically, suggesting they were a political payoff for a
company with strong ties to the GOP and whose executives gave
generously to the Bush campaign.
Sen. Frank Lautenberg, D-N.J., on Thursday asked for Senate hearings
on the Pentagon's findings.
``I have long been troubled by the continued growth of the Pentagon's
no-bid contract with Halliburton, and the delay in the Pentagon's
promise to compete this contract competitively,'' Lautenberg wrote to
Senate Government Affairs Committee Chairwoman Susan Collins, R-Maine.
Cheney and Pentagon officials deny any political motive for awarding
the no-bid contracts to KBR, which has a long-standing relationship
with the military as a major Pentagon contractor.
Routine audits by the Defense Contract Audit Agency uncovered the
problems.
Pentagon officials said they were concerned about the problems with
KBR's contracts, which were awarded without competitive bidding for
up to $15.6 billion for rebuilding Iraq's oil infrastructure and
assisting U.S. troops there. About $5 billion has been spent or
obligated to spend on those contracts so far.
``Contractor improprieties and/or contract mischarging on department
contracts will neither be condoned nor allowed to continue,'' Dov
Zakheim, the Pentagon's budget chief, said Thursday.
The defense officials, who are involved in the audit of the
contracts, said the Pentagon was negotiating with KBR over how to
resolve the fuel-pricing issue. They declined to name the
subcontractor that provided the fuel, saying that company may not
have been notified of the inquiry's findings.
The possible overcharging involved 56.6 million gallons of gasoline
KBR supplied in Iraq from the end of the war until Sept. 30, the
Pentagon officials said. The officials said the KBR was charging
$2.27 a gallon for gasoline while another contract was for $1.18.
Democratic Reps. Henry Waxman of California and John Dingell of
Michigan had accused KBR of price-gouging for gasoline used in Iraq.
The Army is to open its KBR contracts to competitive bidding next
month. The contracts evolved from work to put out oilfield fires to
overseeing rebuilding of Iraq's oil infrastructure and providing fuel
for the country. KBR also provides support services to U.S. troops in
Iraq such as serving hot meals.
Halliburton has said it needs to charge a high price for fuel because
it must be delivered in a combat zone. Several KBR workers have been
killed or wounded in attacks by Iraqi insurgents.
The allegations of overcharging are not the first against KBR. Last
year, the firm paid $2 million in fines to settle charges it inflated
prices for repairs and maintenance at Fort Ord, Calif.
Congress' General Accounting Office found in 1997 and 2000 that KBR
had billed the Army for questionable expenses on its support
contracts for operations in the Balkans. Those reviews cited
instances such as charging $85.98 per sheet of plywood that cost
$14.06 and billing the Army for cleaning some offices up to four
times per day.
Cheney, a former defense secretary, stepped down as chief executive
officer of Halliburton when he became Bush's running mate in 2000 and
has said he played no role in contracts for his former company.
Cheney became head of the company in 1995.
Matt Kelley, Associated Press
Published December 12, 2003
