Fri, Jul 23, 2004 - Page 7 News List

Halliburton, US Army criticized over Iraq deal

SPOILS OF WAR Cost disputes between the Army and the company were caused by deficient management, according to a congressional report


The US Army botched planning and management of the multibillion-dollar contract to provide food and other services to troops in Iraq, congressional investigators said.

Investigators from the Government Accountability Office (GAO) found a "pattern of contractor management problems" which led to cost disputes between the Pentagon and the contractor, Houston-based Halliburton. The GAO investigators also criticized Halliburton's staffing and accounting.

So far, the military has agreed to pay Halliburton more than US$5 billion on the contract in question.

Separate federal investigations are looking into whether Halliburton overcharged the Army for fuel and meals, and allegations that former Halliburton workers may have taken bribes from a Kuwaiti subcontractor.

Separately, a report from congressional Democrats said Halliburton charged the government US$2.68 per gallon to import gasoline to Iraq from Kuwait, while a government agency did the same work for US$1.57 a gallon. That cost the government an extra US$166.5 million, the Democrats' report said.

Halliburton spokeswoman Wendy Hall said price comparisons were unfair because the terms of the contracts were probably different. The company has not obtained a copy of the government arrangement cited in the Democrats' report, Hall said.

The Democrats' report said Halliburton hired a Kuwaiti company to both buy the gas as a middleman and transport it into Iraq, while the Defense Energy Support Center bought the gasoline directly and hired the company only to transport the fuel. Halliburton has said Kuwait's government-controlled oil company would sell gasoline only through the firm, named Altanmia.

Halliburton, which US Vice President Dick Cheney headed from 1995 until 2000, has said it did the best it could in the chaos of war. The company has also pointed to problems with military oversight of the contract -- complaints echoed in the GAO report.

The GAO report, released on Wednesday, said problems with the Army's oversight included waiting until May last year, after the fall of Baghdad, to develop a plan for providing support services to troops in Iraq. That planning didn't include Halliburton because Army officials made the support plan classified.

A "piecemeal approach to planning" also resulted in constant changes to the support plan -- more than 150 in all, the report said. Poor planning forced Halliburton "to scramble to meet contract requirements, resulting in unmet expectations, lower-quality services and unnecessary costs."

The report found that the Army failed to train contract managers on how the contract should be managed, despite more than a decade of experience -- and criticism -- with the same problems. Some contract managers had only attended a two-week training course and others had no training at all, the report said.

One illustration of such problems was the disagreement over charges for serving meals to troops. The Army did not make it clear to Halliburton whether it should charge for the actual numbers of meals served or for providing enough food for four meals a day for the estimated populations of each base camp.

Pentagon auditors say Halliburton should have charged only for meals served, while Halliburton argues it should be paid according to the estimated number of troops. That resulted in a discrepancy of about US$88 million, the report said.

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