Halliburton to lose exclusive Army deal

Seattle Times
Jul. 12, 2006

WASHINGTON — The Army is discontinuing a controversial multibillion-dollar deal with oil services giant Halliburton for logistical support to U.S. troops worldwide, a decision that could cut deeply into the firm's dominance of government contracting in Iraq.

The choice comes after several years of attacks from critics who saw the contract as a symbol of politically connected corporations profiteering on the war.

Under the deal, Halliburton had exclusive rights to provide the military with a wide range of work that included keeping soldiers around the globe fed, sheltered and in communication with friends and family back home. Government audits turned up more than $1 billion in questionable costs. Whistle-blowers told how the company charged $45 per case of soda, double-billed on meals and allowed troops to bathe in contaminated water.

Halliburton officials have denied the allegations strenuously. Army officials Tuesday defended the company's performance but also acknowledged that reliance on a single contractor left the government vulnerable. The Pentagon's new plan will split the work among three companies, to be chosen this fall, with a fourth firm hired to help monitor the performance of the other three. Halliburton will be eligible to bid on the work.

The heavy involvement of U.S. contractors in Iraq has been one of the defining features of the U.S. presence there, with private companies called on for duties including guarding supply convoys and analyzing intelligence.

No contractor has received more money as a result of the invasion of Iraq than Halliburton, whose former chief executive is Vice President Dick Cheney. The logistics work is performed through a Halliburton subsidiary, Kellogg Brown & Root Services. Last year, the Army paid the company more than $7 billion under the contract, according to a search of government contracting data by Eagle Eye, a private consulting firm.

The number this year is expected to be between $4 billion and $5 billion, according to Randy King, a program manager with the Army.

The company maintains that its billing disputes with Defense Department auditors have been resolved and that its work has received rave reviews from the military.

"By all accounts, KBR's logistical achievements in support of the troops in Iraq, Kuwait and Afghanistan have been nothing short of amazing," company spokeswoman Melissa Norcross said in a statement.

King agreed Tuesday. "Halliburton has done an outstanding job, under the circumstances," he said. But he added that Pentagon leaders ultimately decided they did not want to have "all our eggs in one basket" because multiple contractors will give them better prices, more accountability and greater protection if one contractor fails to perform.