June 28, 2005

Halliburton’s Iraq deals described as contract abuse

By Sue Pleming

WASHINGTON (Reuters) - A top U.S. Army procurement officialsaid on Monday Halliburton's deals in Iraq were the worstexample of contract abuse she had seen as Pentagon auditorsflagged over $1 billion of potential overcharges by theTexas-based firm.

Bunny Greenhouse, the Army Corps of Engineers' topcontracting official-turned whistle-blower, said in testimonyat a hearing by Democrats on Capitol Hill that "every aspect"of Halliburton's oil contract in Iraq had been under thecontrol of the Office of the Secretary of Defense.

"I can unequivocally state that the abuse related tocontracts awarded to KBR (Kellogg Brown and Root) representsthe most blatant and improper contract abuse I have witnessedduring the course of my professional career," said Greenhouse,a procurement veteran of more than 20 years.

Her blistering criticism came as Democrats released a newreport including Pentagon audits that identified more than$1.03 billion in "questioned" costs and $422 million in"unsupported" costs for Halliburton's work in Iraq.

Defense Department spokeswoman Lt. Col Rose-Ann Lynch saidthe Pentagon had received the report but had not had a chanceyet to fully review it.

"The department is committed to an integrated, well-managedcontracting process in Iraq," said Lynch, adding that justbecause costs were questioned by auditors this did not mean acompany had overcharged the military.

Halliburton's subsidiary KBR is the U.S. military's biggestcontractor in Iraq and has been accused by Democrats of gettinglucrative work there because of its ties to Vice President DickCheney who headed Halliburton company from 1995-2000.

Pressed by lawmakers whether she thought the defensesecretary's office was involved in the handout and running ofcontracts to KBR, Greenhouse replied: "That is true."

"I observed, first hand, that essentially every aspect ofthe RIO (Restore Iraqi Oil) contract remained under the controlof the Office of the Secretary of Defense. This troubled me andwas wrong," said Greenhouse.

Halliburton issued a statement strongly rejecting commentsby Greenhouse and others at the hearing, including a former KBRemployee who accused the company of overcharging for foodservices provided to troops under a logistics deal.

"The only thing that's been inflated is the politicalrhetoric which is mostly a rehash of last year's elections," spokeswoman Cathy Mann said of the hearing.


Regarding claims of political influence because of Cheney,Mann said it was easier to "assign devious motives than to takethe time to learn the truth."

Both the Pentagon and the Corps, which was in charge of asole-source oil contract given to KBR in Iraq, have denied anyspecial treatment for KBR. The Corps did not immediatelyrespond to questions.

Democrats called for an urgent hearing and an investigationinto what they called contracting abuses involving KBR.

"This testimony doesn't just call for Congressionaloversight -- it screams for it," said Sen. Byron Dorgan, aDemocrat from North Dakota.

What concerned Greenhouse most was that the oil contract,which had a top value of $7 billion, was given to KBR withoutcompetitive bidding. She irked her bosses by writing herconcerns by hand in official documents but said these wereoverlooked.

In one instance, she said Army Corps officials bypassedgetting her signature to grant a waiver for KBR to be relievedof its obligation to provide cost and pricing data for bringingfuel into Iraq.

That waiver was granted after a draft Army audit said KBRmay have overcharged the military by at least $61 million tobring in fuel to Iraq to ease a shortage of refined oil.

Greenhouse acknowledged she had become a thorn in the sideof the Army Corps and said she had been advised not to attendthe hearing because of its partisan nature.

Rory Mayberry, a former food production manager at a U.S.military base for KBR from February-April 2004, said thecompany charged for meals it did not serve to troops and haddished up spoiled food.

KBR's Mann dismissed his taped testimony and said issuesregarding billing over food services had been resolved.