June 19, 2008

Pentagon Report Blasts KBR’s Post-Katrina Work

BILOXI, Miss. _ A Pentagon investigative report alleges the firm KBR Inc. held an illegal contract, overcharged millions to the Navy and produced shoddy workmanship on its South Mississippi jobs after Katrina.

A report released by the Department of Defense's Office of the Inspector General says KBR worked on Navy facilities in Gulfport, Miss.; Pascagoula, Miss.; at Stennis Space Center; and in Pensacola, Fla., among other Gulf Coast sites after hurricanes Ivan and Katrina. The group holds a $500 million disaster-recovery contract with the Naval Facilities Engineering Command Atlantic based in Norfolk, Va., which was struck in 2004.

KBR received the deal from the federal government while it was a subsidiary of Halliburton, for which Vice President Dick Cheney is a former chairman of the board and chief executive officer. Cheney resigned from his Halliburton post to be President Bush's running mate in 2000.

According to the Inspector General's probe, the company was hired to set up trailer parks for displaced Navy personnel, make roof repairs on the Naval Construction Battalion Center in Gulfport and remove debris, among other jobs.

The Houston-based firm allegedly used a type of contract for some of the jobs known as "cost plus percentage of cost," which the report says is a violation of federal law. Its premise is the higher the costs, the more profit the contractor turns, and the deal actually rewards wastefulness and inefficiency, inspectors concluded.

KBR Corporate Communications Director Heather Browne said Wednesday in a statement to the Sun Herald newspapers that the company takes exception to the findings.

``KBR does not agree with many of the conclusions contained in the report,'' Browne said. ``We fully cooperated with the Inspector General in its review and provided our comments, including exceptions, to the Inspector General. We will continue to work with the Navy to resolve any items associated with the CONCAP contract that are unresolved.''

In one instance, the company failed to get competitive bids for subcontracts and it could have actually cost taxpayers $2 million more than it should have, the report said.

The company also allegedly charged representatives twice in some cases for work on the trailers, as shoddy workmanship had to be completely replaced. One laundry facility was unusable, and structures were wired with plugs that had only about half of the power-handling capacity they needed. The plugs had to be replaced.

The work at the trailer parks drew the suspicions of one technical evaluator.

``It's my humble opinion, but there is no way on God's green earth that you have blown through $500,000 in the work for this (technical direction),'' the report quoted the official as replying to a worker.

Roof repairs at the NCBC Gulfport took twice as long as the terms of the original agreement, the report said. Construction crews were rated as below average in competence in many cases, and got the job right only after much oversight from government inspectors.

But the conditions of the infrastructure in South Mississippi in the days following the storm were noted in the audit.

``The environment in the aftermath of Katrina tremendously increased the difficulty in executing the work,'' the report said. ``The surrounding infrastructure and local labor pool was decimated. Housing for labor was non-existent. The only option was to house the workforce in tents, RVs and at various locations on the base. KBR should be commended on the efforts to accommodate the volume of individuals and maintain cleanliness and safety.''

KBR paid $540 a month for cell phones for some of its roofers, and also charged a $720-per-month fee per employee for fuel, despite the company's agreement to provide fuel in the contract.

The Inspector General's report also says the Navy paid KBR nearly all of the extra fees it was to receive if the work was done right, whether it was substandard or not. This made the company unmotivated to strive for perfection, as the money was coming anyway in most cases. The report says the Navy is unable to defend its awarding of $7.5 million of such fees.

The report recommends the Navy recover $8.4 million allegedly overcharged by KBR for excessive equipment leasing and profits on materials. In one instance, KBR contractors paid roofers hourly rates, which were redacted in the report, and meals and other services for a total of $4.1 million, when the combined fees for those items should have been about $1.7 million, inspectors estimated. The work also included about $7.2 million in markups on materials as part of the cost-plus-percentage-of-cost contract.

The report said the Navy had no way to measure the contractor's cost performance on $229 million in task orders. It said the Navy was basically just monitoring how much contractors were spending.


(c) 2008, The Sun Herald (Biloxi, Miss.).

Visit The Sun Herald Online at http://www.sunherald.com/

Distributed by McClatchy-Tribune Information Services.

For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.