Pentagon Criticizes
Halliburton Fees
LA Times
T. Christian Miller and Mark Mazzetti, Times Staff Writers
March 2005
WASHINGTON — Pentagon auditors sharply criticized
Halliburton Corp. for more than $100 million in questionable
costs related to the delivery of fuel to Iraq in the early days
of the war, according to a report released today.
Among other items, the Pentagon's Defense Contract Audit
Agency attacked a Halliburton bill of $27.5 million for the
delivery of $82,100 worth of liquefied petroleum gas, calling it
"illogical."
The report also faulted Halliburton for misleading auditors,
poorly managing multimillion-dollar subcontracts and failing to
deliver key documents to justify the prices paid for fuel.
The Pentagon audit report from October 2004 is the most
definitive yet to suggest that Halliburton may have overcharged
the U.S. government on its $2.5-billion contract to supply fuel
and protect Iraq's oil infrastructure.
The findings prompted a blistering attack on the Bush
administration by Rep. Henry Waxman (D-Santa Monica), whose
office released the audit. Halliburton, once run by Vice
President Dick Cheney, was the focus of repeated Democrat attacks
during the presidential campaign.
"We would like to know when and how you plan to recover the
overcharges from Halliburton and restore them to U.S. taxpayers
and the Iraqi people," Waxman wrote in a letter to Bush.
The Army Corp of Engineers, which oversees Halliburton's
contract, declined to comment on the audit, which is considered
confidential. A spokesman said the Army Corps was still
negotiating final payments to Halliburton.
"We will consider both the DCAA audits and all other
information available to us in reaching a final government
negotiating position," said Carol Sanders, an Army Corps
spokesman.
A spokeswoman for the Houston-based oil services giant called
the audit part of the "normal contracting process." She said
auditors did not adequately take into account that KBR, a
Halliburton subsidiary, was delivering fuel in the middle of a
war zone.
She also said Halliburton had supplied all necessary documents
to auditors, and paid a fair price for fuel.
"The facts show that KBR delivered fuel crucial to the Iraqi
people when failure was not an option," said Wendy Hall, a
corporate spokeswoman. "At a time when neither government
agencies nor other companies could or would have delivered, KBR
faced the challenges and fulfilled this urgent mission, and we
did so within the appropriate bounds of government
contracting."
Halliburton's fuel contract became the subject of controversy
soon after it was awarded in March 2003 without the competitive
bidding designed to protect U.S. taxpayer dollars.
The contract was designed to protect Iraq's oil infrastructure
from sabotage. Instead, the government used the contract to order
Halliburton to buy fuel to stave off civil unrest that broke out
after Saddam Hussein's fall. Halliburton shipped in gas, kerosene
and other fuels from Kuwait, Jordan and Turkey, spending nearly
$1.5 billion of Iraqis' money to prevent shortages.
Pentagon officials have said they gave the company the
contract without bidding because of the urgent need. Questions
remain over the role of Bush administration appointees in the
awarding of the contract. At least two career civil servants have
raised the possibility that political pressure was applied in
different parts of the contracting process.
Democrats focused on the purchase of fuel, prompting the DCAA
to release a preliminary audit in December 2003 that raised
questions about $61 million in spending.
The audit was completed in October 2004, one month before the
November election. Army Corps officials said they did not respond
to Waxman's previous requests to release audit information
because the payment negotiations were still taking place. Two
more audits have been completed since the October 2004 audit.
The auditors raised several concerns over $108 million in
costs contained in Halliburton's billing, including $69 million
in costs associated with fuel obtained from a Kuwaiti
subcontractor, Altanmia.
The auditors criticized Halliburton for not renegotiating its
initial contract with Altanmia, which was signed in the frenzied
months after the March 19 invasion began. According to e-mail
messages obtained by The Times, it was signed under pressure from
the U.S. ambassador to Kuwait, Richard Jones.
It also contradicted a Halliburton claim that the fuel
contract with Altanmia was competitively bid because Altanmia was
the only company in Kuwait with a license to deliver the fuel at
the time.
"The other bids are irrelevant," the audit stated.
Auditors also said Halliburton never supplied documentation
for its costs concerning the fuel, and that the company had made
inaccurate statements to describe its process.
For instance, Halliburton told auditors it consulted with the
company's internal "worldwide suppliers listing" to determine
whether fuel prices were fair. Upon investigation, auditors found
that the company did not maintain such a listing.
"KBR did not always provide accurate information" to auditors,
the audit said.
Finally, the audit criticized Halliburton's charge for
transporting the liquefied petroleum gas. It suggested that the
charge may have been a "misclassification," and urged Halliburton
to review it.
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