Halliburton contracts
are classified
CBS News
April 27, 2003
(CBS) After dropping more than 28,000 bombs on Iraq, the
United States has now begun the business of rebuilding the
country.
And it promises to be quite a business. With at least $60
billion to be spent over the next three years, the Iraqi people
won't be the only ones benefiting. The companies that land the
biggest contracts to do the work will cash in big-time.
Given all the taxpayer money involved, you might think the
process for awarding those contracts would be open and
competitive. Well, so far, it has been none of the above. And the
early winners in the sweepstakes to rebuild Iraq have one thing
in common: lots of very close friends in very high places,
correspondent Steve Kroft reports.
One is Halliburton, the Houston-based energy services and
construction giant whose former CEO, Dick Cheney, is now vice
president of the United States.
Even before the first shots were fired in Iraq, the Pentagon
had secretly awarded Halliburton subsidiary Kellogg, Brown &
Root a two-year, no-bid contract to put out oil well fires and to
handle other unspecified duties involving war damage to the
country's petroleum industry. It is worth up to $7
billion.
But Robert Andersen, chief counsel for the Army Corps of
Engineers, says that oil field damage was much less than
anticipated and Halliburton will end up collecting only a small
fraction of that $7 billion. But he can't say how small a
fraction or exactly what the contract covers because the mission
and the contract are considered classified information.
Under normal circumstances, the Army Corps of Engineers would
have been required to put the oil fire contract out for
competitive bidding. But in times of emergency, when national
security is involved, the government is allowed to bypass normal
procedures and award contracts to a single company, without
competition.
And that's exactly what happened with Halliburton.
"We are the only company in the United States that had
the kind of systems in place, people in place, contracts in
place, to do that kind of thing,' says Chuck Dominy,
Halliburton's vice president for government affairs and its
chief lobbyist on Capitol Hill.
He says the Pentagon came to Halliburton because the company
already had an existing contract with the Army to provide
logistical support to U.S. troops all over the world.
"Let me put a face on Halliburton. It's one of the
world's largest energy services companies, and it has a strong
engineering and construction arm that goes with that' says
Dominy.
"You'll find us in 120 countries. We've got 83,000
people on our payroll, and we're involved in a ton of different
things for a lot of wonderful clients worldwide.'
"They had assets prepositioned,' says Anderson.
"They had capability to reach out and get sub-contractors
to do the various types of work that might be required in a
hostile situation.'
"The procurement of this particular contract was done by
career civil servants, and I know that it's a perception that
those at the very highest levels of the administration, Democrat
and Republican, get involved in procurement issues. It can
happen. But for the very most part, the procurement system is
designed to keep those judgments with the career public
servants.'
But is political influence not unknown in the process? In this
particular case, Anderson says, it was legally justified and
prudent.
But not everyone thought it was prudent. Bob Grace is
president of GSM Consulting, a small company in Amarillo, Texas,
that has fought oil well fires all over the world. Grace worked
for the Kuwait government after the first Gulf War and was in
charge of firefighting strategy for the huge Bergan Oil Field,
which had more than 300 fires. Last September, when it looked
like there might be another Gulf war and more oil well fires, he
and a lot of his friends in the industry began contacting the
Pentagon and their congressmen.
"All we were trying to find out was, who do we present
our credentials to,' says Grace. "We just want to be
able to go to somebody and say, ‘Hey, here's who we are,
and here's what we've done, and here's what we
do.''
"They basically told us that there wasn't going to be
any oil well fires.'
Grace showed 60 Minutes a letter from the Department of Defense
saying: "The department is aware of a broad range of well
firefighting capabilities and techniques available. However, we
believe it is too early to speculate what might happen in the
event that war breaks out in the region."
It was dated Dec. 30, 2002, more than a month after the Army
Corps of Engineers began talking to Halliburton about putting out
oil well fires in Iraq.
"You just feel like you're beating your head against the
wall,' says Grace.
However, Andersen says the Pentagon had a very good reason for
putting out that message.
"The mission at that time was classified, and what we
were doing to assess the possible damage and to prepare for it
was classified,' says Andersen. "Communications with
the public had to be made with that in mind.'
"I can accept confidentiality in terms of war plans and
all that. But to have secrecy about Saddam Hussein blowing up oil
wells, to me, is stupid,' says Grace. "I mean the
guy's blown up a thousand of them. So why would that be a
revelation to anybody?'
But Grace says the whole point of competitive bidding is to
save the taxpayers money. He believes they are getting a raw
deal. "From what I've read in the papers, they're
charging $50,000 a day for a five-man team. I know there are guys
that are equally as well-qualified as the guys that are over
there that'll do it for half that.'
Grace and his friends are no match for Halliburton when it
comes to landing government business. Last year alone,
Halliburton and its Brown & Root subsidiary delivered $1.3
billion worth of services to the U.S. government.
Much of it was for work the U.S. military used to do itself.
"You help build base camps. You provide goods, laundry,
power, sewage, all the kinds of things that keep an army in place
in a field operation,' says Dominy.
"Young soldiers have said to me, ‘If I go to war,
I want to go to war with Brown & Root.'"
And they have, in places like Afghanistan, Rwanda, Somalia,
Kosovo and now Iraq.
"It's a sweetheart contract,' says Charles Lewis,
executive director of the Center For Public Integrity, a
non-profit organization that investigates corruption and abuse of
power by government and corporations. "There's no other
word for it.'
Lewis says the trend towards privatizing the military began
during the first Bush administration when Dick Cheney was
secretary of defense. In 1992, the Pentagon, under Cheney,
commissioned the Halliburton subsidiary Brown & Root to do a
classified study on whether it was a good idea to have private
contractors do more of the military's work.
"Of course, they said it's a terrific idea, and over the
next eight years, Kellogg, Brown & Root and another company
got 2,700 contracts worth billions of dollars,' says
Lewis.
"So they helped to design the architecture for
privatizing a lot of what happens today in the Pentagon when we
have military engagements. And two years later, when he leaves
the department of defense, Cheney is CEO of Halliburton. Thank
you very much. It's a nice arrangement for all
concerned.'
During the five years that Cheney was at Halliburton, the
company nearly doubled the value of its federal contracts, and
the vice president became a very rich man.
Lewis is not saying that Cheney did anything illegal. But he
doesn't believe for a minute that this was all just a
coincidence.
"Why would a defense secretary, former chief of staff to
a president, and former member of congress with no business
experience ever in his life, not for a day, why would he become
the CEO of a multibillion dollar oil services company,'
asks Lewis
"Well, it could be related to government contracts. He
was brought in to raise their government contract profile. And he
did. And they ended up with billions of dollars in new contracts
because they had a former defense secretary at the
helm.'
Cheney, Lewis says, may be an honorable and brilliant man, but
"as George Washington Plunkett once said, ‘I saw my
… seen my opportunities and I took them."
Both Halliburton and the Pentagon believe Lewis is insulting
not only the vice president but thousands of professional civil
servants who evaluate and award defense contracts based strictly
on merit.
But does the fact that Cheney used to run Halliburton have any
effect at all on the company getting government contracts?
"Zero,' says Dominy. "I will guarantee you
that. Absolutely zero impact.'
"In fact, I wish I could embed [critics] in the
department of defense contracting system for a week or so. Once
they'd done that, they'd have religion just like I do, about how
the system cannot be influenced.'
Dominy has been with Halliburton for seven years. Before that, he
was former three-star Army general. One of his last military
assignments was as a commander at the Army Corps of
Engineers.
And now, the Army Corps of Engineers is also the government
agency that awards contracts to companies like Halliburton.
Asked if his expertise in that area had anything to do with
his employment at Halliburton, Dominy replies,
"None.'
But Lewis isn't surprised at all.
"Of course, he's from the Army Corps. And of
course, he's a general,' says Lewis. "I'm
sure he and no one else at Halliburton sees the slightest thing
that might look strange about that, or a little cozy
maybe.'
Lewis says the best example of these cozy relationships is the
defense policy board, a group of high-powered civilians who
advise the secretary of defense on major policy issues - like
whether or not to invade Iraq. Its 30 members are a Who's Who of
former senior government and military officials.
There's nothing wrong with that, but as the Center For
Public Integrity recently discovered, nine of them have ties to
corporations and private companies that have won more than $76
billion in defense contracts. And that's just in the last two
years.
"This is not about the revolving door, people going in
and out,' says Lewis. "There is no door. There's no
wall. I can't tell where one stops and the other starts. I'm dead
serious.'
"They have classified clearances, they go to classified
meetings and they're with companies getting billions of dollars
in classified contracts. And their disclosures about their
activities are classified. Well, isn't that what they did when
they were inside the government? What's the difference, except
they're in the private sector.'
Richard Perle resigned as chairman of the defense policy board
last month after it was disclosed that he had financial ties to
several companies doing business with the Pentagon.
But Perle still sits on the board, along with former CIA
director James Woolsey, who works for the consulting firm of
Booz, Allen, Hamilton. The firm did nearly $700 million dollars
in business with the Pentagon last year.
Another board member, retired four-star general Jack Sheehan,
is now a senior vice president at the Bechtel corporation, which
just won a $680 million contract to rebuild the infrastructure in
Iraq.
That contract was awarded by the State Department, which used
to be run by George Schultz, who sits on Bechtel's board of
directors.
"I'm not saying that it's illegal. These guys wrote the
laws. They set up the system for themselves. Of course it's
legal,' says Lewis.
"It just looks like hell. It looks like you have folks
feeding at the trough. And they may be doing it in red white and
blue and we may be all singing the "Star Spangled Banner," but
they're doing quite well.'
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