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ABOUT HALLIBURTON

Sheryl Tappan has written proposals that have won billions of dollars’ worth of U.S. Government work. In early 2003, she was responsible for the proposal that won Bechtel the Iraq civil infrastructure reconstruction contract from USAID ($1.3 billion). In the summer of 2003, she led Bechtel’s proposal team in the Sons of RIO competition until discovering it was a sham and Bechtel withdrew. Last fall, she wrote much of the proposal that won Bechtel the second Iraq civil contract from USAID ($1.8 billion). After completing that assignment, she retired as a Bechtel consultant to pursue other projects, including “Shock and Awe in Fort Worth.” According to Representative Henry Waxman, “She's been very helpful in raising significant concerns about Halliburton's oil work in Iraq. We place a great deal of weight on her information due to her credentials."

Click here for a timeline of events surrounding the Iraqi contracting story.

For more information, read Sheryl Tappan's book entitled "Shock and Awe in Fort Worth: How the U.S. Army Rigged the 'Free and Open Competition' to Replace Halliburton's Sole-Source Oil Field Contract in Iraq." Click here to buy the book.

The article below is published here with permission from Ms. Tappan.



THE SONS OF RIO CONSPIRACY
By Sheryl Tappan
August 17, 2004

When the secret $7 billion Restore Iraqi Oil (RIO) contract the Pentagon gave Halliburton KBR was revealed in March 2003, Bush administration critics began accusing the Pentagon of cronyism, because of the Cheney-Halliburton connection. In response, the Pentagon began promising to replace that contract by holding a competition for two new contracts as quickly as possible. The irony is the “Sons of RIO” competition turned out to be far more corrupt than the secret sole-source award. Pentagon officials, up and down the chain of command, lied and cheated Halliburton’s competitors and broke federal laws to ensure Halliburton kept all of the Iraq oil work. They include generals and high-level political appointees at the Pentagon, as well as lower-level contracting staff at the Army Corps of Engineers’ Southwestern Division/Fort Worth District, who conducted the Sons of RIO competition.

Another irony is the evidence of conspiracy, corruption, and procurement fraud is contained in official documents posted on the Web by the Corps in July and August of 2003 for the bidders — and the entire world — to see.1 The key evidence is contained in (a) the solicitation (aka request for proposal or RFP), which the Corps issued on July 7, 2003, to start the competition, and (b) the “Restoration of Iraqi Oil Infrastructure Final Work Plan,” which proved that all of the RIO work had already been committed to Halliburton KBR by the Corps, the Coalition Provisional Authority (CPA), and the Iraqi Ministry of Oil, except for a small percentage committed to the Ministry for its own personnel to perform. The Corps withheld this critical information from the bidders — against federal law — until only 13 days before their proposals were due (August 14, 2003). If Halliburton’s competitors had known about the plan, developed in the spring with Halliburton KBR’s help, the Pentagon would not have had the competition it needed to keep the critics off its back.

So the Sons of RIO competition was a farce — none of the work given to Halliburton would be transferred to the new contractors. This was finally confirmed by the Pentagon the day before the bidders’ proposals were due when a Corps spokesman admitted the competition had been a sham when he said, “There might not be enough emergency repair work to merit additional contracts…the main reason the Corps was accepting bids for two new oil contracts was the possibility of more looting and sabotage.”2

Halliburton’s competitors had repeatedly asked for clarification regarding the scope of work that would be performed under the new contracts, but the Corps’s attempts to clarify — or hide — the true scope were even more confusing. For example, the RFP was missing the most important section, the scope of work. When the omission was questioned, the Corps said the new contracts’ scope was specified in a document entitled “Contracting Strategy,” but this document described how Halliburton KBR would do the work!

Official Lies and Omissions to Hide the Truth

Nearly 200 people attended the bidders meeting in Dallas on July 14, 2003, but the Corps failed to mention the Final Work Plan, any of its contents, or the 3-day meeting in Baghdad the week before at which 128 Corps, Halliburton, KBR, CPA, CENTCOM, and Iraqi Ministry of Oil personnel finalized the details. They had agreed on the 220 separate projects that would be needed to return Iraq’s oil production to its pre-war capacity and thereby fulfill the U.S. Government’s commitment. The Final Work Plan and its series of spreadsheets specified the cost, schedule, responsible party (Halliburton KBR or Iraqi Ministry of Oil), and other details for each of the 220 projects (6 more projects were subsequently added).

The Corps also failed to mention the requirement, clearly stated in the Final Work Plan, that all subcontracts and purchases of equipment and materials had to go through Halliburton KBR’s procurement and accounting systems, even those for projects managed by Iraqi Ministry of Oil personnel. So Halliburton would get a fee and profit on virtually everything done in the Iraq oil fields. The Plan said Halliburton’s procurement and accounting systems had been audited and approved many times over the years in association with various federal contracts to ensure they met the government’s stringent requirements. Interestingly, those are the same systems later dubbed “antiquated” by Pentagon Comptroller Dov Zakheim and blamed for tens of millions of dollars of Halliburton’s overcharges in Iraq.3 (Zakheim, a Bush appointee, left the Pentagon in April for a high-paying position with another large federal contractor.)

The Corps failed to mention a lot more, too, including the fact that Halliburton KBR was right up there with the Corps, CPA, and Iraqi Ministry of Oil on the executive board and in every other box/function in the organization charts in the Plan!

Media Misled, Halliburton Contract Not Replaced

Although the Corps originally promised to award the Sons of RIO contracts no later than October 15, 2003, they announced delay after delay for one bogus reason after another.4 Meanwhile, Halliburton KBR was finishing more and more of the work under the original RIO contract, which had a ceiling of $7 billion and a duration of 2 years. Finally, on January 16, 2004, new contracts were awarded: another $1.2 billion to Halliburton KBR for work in the southern oil fields of Iraq and $800 million to a Parsons-Worley team for work in the north.

Contrary to the popular perception, the new contracts did not replace Halliburton’s secretly awarded RIO contract because that contract was not cancelled. Halliburton KBR continues to perform work already committed to the company by the Pentagon under the sole-source contract, and that includes work in the northern oil fields, as well as the south. The new contracts are only for additional work that may be required, as the Corps stated in the first sentence of its January 16 press release: “The U.S. Army Corps of Engineers announced today that it has awarded two contracts for future work restoring the Iraqi oil infrastructure to pre-war production levels.” As the Corps spokesman said last summer, “the main reason the Corps was accepting bids for two new oil contracts was the possibility of more looting and sabotage.”2

Use of the word “replace” by the Corps, the media, and others is therefore incorrect. No work given to Halliburton last year under the original $7 billion contract has been taken away. Quite the contrary. As Representative Henry Waxman (D-CA), Ranking Minority Member of the House Government Reform Committee, wrote to the Committee’s Chairman, Representative Tom Davis (R-VA), on January 23, 2004, “Additional questions about the Administration’s conduct have been raised in connection with last Friday’s award to Halliburton of an additional contract in Iraq worth $1.2 billion.”

According to the Houston Chronicle, Halliburton is still working in the northern oil fields on projects assigned under the original RIO contract, including laying seven new pipelines across the Tigris River.5 And Halliburton’s original RIO contract will probably not be closed out for quite some time if what Iraq’s new oil minister, Thamir Ghadbhan, reported in June is correct — work had begun on only 119 of the 226 RIO projects, and not a single project had been completed.6 The original 220 were supposed to have been completed by March 31, 2004, according to the Final Work Plan. Most of the problems were not security-related, according to an Iraqi oil industry insider.6 In May, Iraqi Ministry of Oil officials blamed Halliburton KBR’s “disorganized work” for the RIO program being so far behind. Abdul Kareem Jassem, General Director of the government-owned South Gas Company, said, “We have major problems with KBR. We have been unable to meet our pre-war production levels because of them.”7

Phillip Carroll, the former head of Shell Oil who became the CPA’s Senior Oil Advisor, was quoted by the Houston Chronicle as saying “a reasonable timetable for completing that list of projects was 12 to 18 months” and completing the work by the end of March would have required “really doing things at a breakneck pace.”5 If that was Mr. Carroll’s professional opinion, why then did he sign the Final Work Plan, thereby approving it on behalf of Ambassador Bremer, the CPA, and the Bush administration? Was it to ensure that Halliburton had virtually all of the RIO work envisioned at that time locked in with the approval of both the U.S. Government and the Iraqi Ministry of Oil, whether the company could really complete the work on time or not?

Major Mysteries Remain, Media Uninterested

In January, the Pentagon gave Halliburton an additional $1.2 billion worth of work to restore Iraqi oil production to its pre-war capacity even though the Pentagon, other Bush administration officials, and Halliburton executives were already claiming success in meeting that very goal. Vice President Cheney said last December that oil production was back to the pre-war level, and that was confirmed by Stoney Cox, Halliburton’s RIO program director, when Halliburton KBR executives testified before the House Government Reform Committee hearing on July 22. The Corps of Engineers’ head of Task Force RIO, General Robert Crear, declared the RIO mission complete in his final RIO monthly status report, posted on the Web on February 2. He wrote, “We would not have been successful without our other team members, over 500 personnel from our contractor Kellogg Brown and Root... In the last year the RIO team has successfully stood up the Iraqi north and south oil companies… Together, we made the Iraqi oil infrastructure operational again in spite of conditions, obstacles and sabotage.”

Both General Crear and General Robert Flowers, head of the entire Corps, testified to that success before the House Appropriations Committee in March. If the U.S. Government’s responsibility had been fulfilled, why did the Pentagon commit two billion more hard-earned taxpayer dollars to Halliburton and the new Parsons-Worley team? Apparently, no one cares because no one has questioned, let alone explained, the major discrepancy between the success claimed by U.S. officials and the failures reported by Iraqi oil officials.

The final mystery is why Bush administration critics continue to focus on the secret RIO award and Halliburton’s overcharges for fuel, meals, etc. They have yet to turn their attention to the Sons of RIO competition, where the evidence of conspiracy, corruption, and procurement fraud is black and white, not the grey area of federal law that governs sole-source awards. The question is — why?

Perhaps because Halliburton’s competitors who know what happened have not complained for fear of jeopardizing their chances of winning future Pentagon work. Federal contractors adhere to an unofficial code of silence; they will not ‘bite the hand that feeds them’ by criticizing their government customers except anonymously or off the record.

Perhaps Bush administration critics continue to focus on the secret RIO award and overcharges for fuel, meals, etc., because federal contracting documents, regulations, and procedures are too time-consuming to explore and too difficult to understand for those not involved with them on a regular basis. Pentagon officials have made many statements to the press about the Iraq oil contracts, including the reasons for the delays in the Sons of RIO awards, that are blatantly untrue. They may have sounded reasonable, but they were inaccurate representations of federal procurement laws and regulations and the procedures that normally ensure fair play. Not only were the media and the public unable to discern the difference, but persons in oversight and review positions in the government were not able to either.

Or perhaps the reason Bush administration critics have yet to turn their attention to the Sons of RIO competition is as simple as, after all the outcry over the secret award, no one ever dreamed Pentagon officials would be arrogant enough and corrupt enough to con us again. Since the secret RIO contract was revealed in March last year, various actions and statements of Pentagon officials have been reported in the media as rather isolated events. There was apparently no attempt to connect them, which is unfortunate because they reveal a clear pattern of cause and effect, conspiracy and corruption. You can see it for yourself in the timeline from the second edition of “Shock and Awe in Fort Worth.”

References:

1) All of the official procurement documents associated with the Sons of RIO competition were posted on the Web by the Corps of Engineers; however, the files were rather cryptically named; for easier access, go to http://www.bookregime.com where you can download a self-extracting zip file, prepared by the author, that contains the identical documents but clearly named.

2) David Streitfeld, “New Iraq Contracts Offer Just ‘Scraps,’” Los Angeles Times, 8/14/03.

3) Government Executive, “No Iraq Supplemental Bills Expected in 2004,” 12/17/03, posted on www.govexec.com.

4) See Chapter 7, “Contractor and Corps Improprieties: the Finger Pointing Begins,” in the author’s book, “Shock and Awe in Fort Worth: How the U.S. Army Rigged the ‘Free and Open Competition’ to Replace Halliburton’s Sole-Source Oil Field in Iraq” (April 2004, Pourquoi Press; updated and expanded Second Edition, July 2004).

5) David Ivanovich, “Firms Staying to Help Oil Flow, Houston Chronicle, 6/26/04.

6) Reuters, “Delays Dog U.S.-Funded Iraq Oil Projects,” 6/14/04, posted on www.reuters.com.

7) Glen Carey et al., “Iraq Oil Infrastructure Repair Shows Mixed Progress,” Engineering News-Record, 5/10/04.

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