A US military energy unit announced on Tuesday that it was taking over the task of providing fuel for Iraq, ending a Pentagon deal with Vice President Dick Cheney's former company Halliburton amid allegations of price gouging by the Texas-based energy services giant.
The Pentagon's Defense Energy Support Center said it had been directed to assume control of rebuilding Iraq's oil industry and that it would award new contracts through a competitive bidding process.
In yesterday's editions, The Washington Post quoted Pentagon officials as saying that the change had been under discussion for months and that the timing was not related to allegations against Halliburton subsidiary Kellogg Brown & Root (KBR), which was awarded a no-bid contract in March to rebuild Iraq's oil industry.
The Defense Energy Support Center said in a statement that the agency had been directed to "support the Iraqi Ministry of Oil and Task Force-Restore Iraqi Oil (TF-RIO) by importing and distributing fuel to the Iraqi civilian population."
"The center will strive to put competitively awarded contracts in place as quickly as possible for this mission," DESC director Richard Connelly said. "Existing TF-RIO contracts will remain in place until adequate DESC contract solutions are implemented," it said.
Earlier this month, the Pentagon said that a draft audit found evidence that KBR may have overcharged US taxpayers US$61 million to supply fuel to Iraq from Kuwait.
Halliburton strongly denies wrongdoing. Cheney was chief executive of Halliburton from 1995 to 2000.
In response to questions posed by Pentagon auditors, KBR's president and chief executive, Randy Harl, said the firm "delivered fuel to Iraq at the best value, the best price and the best terms."
Harl also said that the US military had approved the delivery of fuel from Kuwait, even though it was at a higher cost than that available via Turkey.
KBR was the first to suggest ways of cutting costs and suggested Turkey was a better source than Kuwait for fuel, adding that the recommendation resulted in a US$164 million saving for US taxpayers.
The work given to KBR in Iraq has been criticized by Democrats, who alleged cronyism.
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