- The Washington Times - Thursday, December 11, 2003


A Pentagon investigation has found overcharging and other violations in Iraq reconstruction contracts worth $15.6 billion that were awarded to Vice President Dick Cheney’s former company, two defense officials said yesterday.

An audit of Halliburton’s Kellogg, Brown & Root subsidiary found substantial overcharging for fuel and other items, the officials said, speaking on the condition of anonymity. The problems go beyond overcharging, they said, declining to elaborate.

The Defense Contract Audit Agency talked with KBR executives during the audit, the officials said.

In an e-mailed statement, Halliburton spokeswoman Wendy Hall denied the company had overcharged. She said Halliburton was responding to questions from Pentagon auditors and was “confident our responses will satisfy the DCAA.”

She also challenged the Pentagon’s estimate of the contracts’ worth. She said she did not know a precise amount but $5 billion was “about right.”

Democratic Reps. Henry A. Waxman of California and John D. Dingell of Michigan have accused KBR of price gouging for gasoline used in Iraq. The two members of Congress said Halliburton charged the Army as much as $2.65 a gallon for gas under a no-bid contract, while another Pentagon agency imported fuel from Kuwait to Iraq at a cost of $1.09 to $1.15 per gallon.

The Army is to open its KBR contracts to competitive bidding next month. The contracts evolved from work to put out oil-field fires to overseeing rebuilding of Iraq’s oil infrastructure and providing fuel for the country. KBR also provides support services to U.S. troops in Iraq such as serving hot meals.

Halliburton has said it needs to charge a high price for fuel because it must be delivered in a combat zone. Several KBR workers have been killed or wounded in attacks by Iraqi insurgents.

The accusations of overcharging are not the first against KBR. Last year, the company paid $2 million in fines to settle charges it inflated prices for repairs and maintenance at Fort Ord, Calif.

The General Accounting Office, Congress’ investigative arm, found in 1997 and 2000 that KBR had billed the Army for questionable expenses on its support contracts for operations in the Balkans. Those reviews cited instances such as charging $85.98 per sheet of plywood, which cost $14.06, and billing the Army for cleaning some offices up to four times per day.

Prominent Democrats, including most of the party’s presidential candidates, have said the awarding of several no-bid contracts to Halliburton appears to be a political payoff to a firm whose executives were Bush campaign donors. Bush administration and Halliburton officials have denied politics played any role in awarding the contracts to KBR, which also has Pentagon contracts for support services for troops in Afghanistan and elsewhere.

Mr. Cheney, a former defense secretary, stepped down as chief executive officer of Halliburton when he became Mr. Bush’s running mate in 2000 and has said he played no role in contracts for his former company. Mr. Cheney became head of the company in 1995.

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