- The Washington Times - Friday, November 3, 2006

ASSOCIATED PRESS

A small defense contractor now controlled by former Bush Treasury Secretary John W. Snow is taking on Halliburton Co. by bidding for one of three Army contracts worth up to $50 billion each to provide food and shelter to U.S. troops in Iraq and Afghanistan.

Within days of Mr. Snow becoming chairman of the New York hedge fund that owns IAP Worldwide Services Inc., the company submitted its bid for huge Army contracts that will be awarded by year-end.

Mr. Snow’s Cerberus Capital Management LP owns Cape Canaveral, Fla.-based IAP, which is led by former executives from Halliburton’s engineering, services and construction subsidiary KBR (formerly Kellogg, Brown & Root).

KBR is currently the Army’s sole contractor for providing food and shelter to the military in Iraq and Afghanistan. But the Army now wants multiple contractors for these services and KBR is bidding again. Some defense analysts are predicting both KBR and IAP, which is run by former KBR executives, will each win one of the 10-year deals that start in 2007.

IAP Chief Executive Officer Al Neffgen, who joined the company in December 2004, served as KBR’s chief operating officer of government and infrastructure for the Americas, while President Dave Swindle was vice president of KBR’s business acquisition and national security programs before joining IAP in April 2005. Chuck Dominy, a retired Army lieutenant general, joined IAP in July 2005 after serving for years as Halliburton’s chief lobbyist in Washington.

IAP was founded in 1990 by a former Army logistician as the United States was preparing for “Operation Desert Storm,” and now has 5,500 employees. Cerberus became majority owner in May 2004.

IAP, which has smaller logistics and maintenance pacts with the Navy and Air Force, last month said it submitted a proposal for the Army contracts with a team that includes Lockheed Martin, of Bethesda, and Electronic Data Systems, as well as Home Depot, Microsoft and Sodexho Alliance of France.

An Army spokeswoman said bids were expected Oct. 31, but she declined to provide details about the proposals.

Defense industry analysts said other potential bidders on the Army logistics deals include DynCorp, of Falls Church, and L-3 Communications.

A spokesman for ITT Corp. said it would be pursuing a bid as part of team led by Fluor.

Established in 1992, Cerberus earlier this year said it was leading a consortium to buy a majority stake in General Motors ‘ GMAC Financial Services for $7.4 billion in cash.

IAP is the only defense contractor among the 36 companies owned by Cerberus, according to the $16.5 billion hedge fund’s Web site.

The Army also will award a five-year pact worth up to $225 million to oversee the three contracts. The new support pact, which cannot go to a winner of the service deals, is responsible for program management analysis and documenting the performance of the contract recipients, according to the Army.

KBR also submitted a bid for the new Army deals, its Chief Executive Officer Bill Utt said last week. KBR won the existing contract in 2001 and has been paid $17 billion of a potential $19.3 billion, an Army spokeswoman said.

That money has paid for more than 40,000 workers, mostly in Iraq and Kuwait, who have provided nearly 411 million meals, washed more than 21.7 million bundles of laundry, produced 5.85 billion gallons of water, transported more than 648 million gallons of military fuel, delivered nearly 205.7 million pounds of mail, and kept more than 650 trucks on the road daily, according to the Army and KBR.

Halliburton, whose chief executive officer was now Vice President Dick Cheney from 1995 to 2000, has been criticized since the beginning of the Iraq war about its multibillion-dollar government contracts.

Lawmakers and the U.S. inspector general have accused KBR of abusing federal rules in record-keeping on the current contract.

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