Global Policy Forum

Halliburton Wins New $4.9 Billion Iraq Contract


By David Phinney

July 6, 2005

With little fanfare and no public announcement, the U.S. Army quietly awarded billions of dollars in new work to Halliburton's subsidiary Kellogg, Brown and Root (KBR) on May 1 to support the United States military occupation of Iraq. The new 12-month task order valued at as much as $4.972 billion for the U.S. military's logistical needs includes camp maintenance, new construction and the serving of four meals a day for as many as 120,000 troops at 62 primary camps and a dozen satellite camps, according to a April 3 draft of the agreement, Task Order 89.

Awarded under the sweeping, 10-year Logistics Civil Augmentation Program contract, known as LOGCAP III, this new task order now brings Halliburton's potential billings in Iraq and Afghanistan within a year to nearly $20 billion -- and perhaps more. The recent May 1 agreement reflects the Pentagon's ongoing approval of the Halliburton's performance, despite the fact that critics continue clamoring for investigations of the controversial war contractor's services, whom they accuse of sloppy accounting, bill padding, and unsubstantiated charges.

As of May 5, the total money for Halliburton's logistical services now performed registered at nearly $10.5 billion for Operation Iraqi Freedom, $813 million for Enduring Freedom in Afghanistan and $56.6 million for other LOGCAP related tasks, according to a spreadsheet prepared by the U.S. Army Field Support Command based at Rock Island Arsenal, Illinois, the military command that manages the LOGCAP. Halliburton additionally holds contracts to assist in restoring Iraq's oil industry and import needed fuel (known as Restore Iraqi Oil or RIO) at a total cost of $3.7 billion. Add in the May 1 task order and total billings could nudge the $20 billion mark by next spring on Halliburton's "cost plus" contracts that allow the company to charge an added percentage for management fees over costs.

The potential dollar value of Halliburton's Iraq contracts may reach even higher to as much as $25.4 billion based on a May 3 briefing with Pentagon auditors, according to a report released by Democratic members of Congress, Representative Henry Waxman of California and Senator Byron Dorgan of North Dakota. The lawmakers said they were told that that Halliburton's business "alone represents 52 percent of the total value of all Iraq contracts managed by the Defense Department."

The report also accuses the Houston-based company of possibly billing the Pentagon for more $1.4 billion in questionable and unsupported costs based on audits by the Defense Contract Auditing Agency. Responding to the report, Halliburton spokeswoman Cathy Gist-Mann told CorpWatch that the $1.4 billion figure represents an aggregation of many reviews over a three-year period and that "the amount is a gross mischaracterization of the true facts." Many of the auditors' questions centered on the "quality of supporting documentation," Gist-Mann said. "It is completely wrong to say or to imply that any of these costs ... are now 'overcharges."

When the LOGCAP contract was first signed as an "indefinite-delivery, indefinite-quantity" (ID/IQ) contract in December 2001, few anticipated the contract would be more than $20 billion in just three years. "The contract requires the contractor to deploy within 72 hours of notification and to deliver Combat Support and Combat Service Support for 25,000 troops within 15 days," said a December 17, 2001, Halliburton press release announcing the contract. The agreement called for a one-year base period and nine one-year options.

While the Pentagon publicly announced new Halliburton contracts this June valued at $30 million for improvements at the Guantanamo Bay prison for suspected terrorists and a $1.25 billion logistics agreement for support of U.S. forces deployed in the Balkans, no similar announcement was made to publicize the new $4.9 billion Iraq task order signed on May 1. "We did not announce this task order as this is really not something we ever really thought about doing," said Linda Theis, a spokeswoman for the U.S. Army Field Support Command in Rock Island, Illinois.

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