Congress: Halliburton's war contracts could have helped Katrina victims
20 Feb., 2006
WASHINGTON, Feb. 20 (HalliburtonWatch.org) -- A new congressional report on the failed emergency response to Hurricane Katrina concludes that the victims could have benefited from Halliburton's most-scandalous contract in Iraq. ###
The report quotes Bill Carwile of the Federal Emergency Management Agency (FEMA), who concludes that future disaster response programs should involve "much more robust private sector partnerships," including Halliburton's LOGCAP contract with the Army Corps of Engineers.
LOGCAP is Halliburton's most lucrative Iraq contract and continues to be the primary focus of the military's criticisms related to cost-overcharges. In the first 18 months of the war, the Pentagon's Defense Contract Audit Agency found $1.4 billion in cost overcharges on Halliburton's work in Iraq, most of it performed under LOGCAP.
LOGCAP is a "cost-plus" contract, meaning Halliburton, like most contractors, obtains a higher fee from the military if it spends more of the taxpayers' money. Critics say this arrangement provides an incentive within the company's beauracracy to intentionally or unintentionally inflate costs charged to the military.
A total of $8.8 billion in Iraq money given to private contractors by the Bush administration is currently missing. Over a billion had been given to Halliburton. The scandal nearly matches the $10 billion fraud that occurred under the United Nations oil-for-food program during the 1990s.
Under LOGCAP, Halliburton has been criticized for charging the military $45 per twelve-pack of soda, $100 per 15-pound bag of laundry cleaning, multiple hours for labor even though workers sat around and did nothing, thousands of dollars for office cleaning that occurred more than once per day in the same office, and $85,000 for brand new trucks that were intentionally destroyed because of minor equipment problems. According to whistleblowers in the federal government, Halliburton is charging U.S. taxpayers millions of dollars for trucks in Iraq that are rarely or never used.
Despite the rampant overcharges by Halliburton and other private contractors, the bipartisan congressional report on Katrina concluded that future disaster relief contracts should be modeled after Halliburton's LOGCAP contract.
The congressional report, titled "A Failure of Initiative," calls for greater involvement by private corporations in disaster relief despite widespread allegations of waste, fraud and abuse, including cronyism, that tainted the failed response to Katrina.
The report was issued by the Select Bipartisan Committee to Investigate the Preparation for and Response to Hurricane Katrina.
In a congressional hearing held last week to determine why the post-Katrina response was so poor, some members of Congress proposed that the
government needs more "indefinite-delivery/indefinite-quantity" (ID-IQ)
contracts like the LOGCAP in place before a disaster hits, so that the
private sector can be organized to mobilize quickly to respond.
But a monopoly contract like LOGCAP provides few of the cost-cutting advantages built into the competetive bidding process and effectively shields much of the work from effective oversight, particularly when the main contractor uses
subcontractors (who often hire subcontractors in turn) to perform the
actual work. The "cost-plus" fee arrangement creates a disincentive to
reduce any inefficiencies in such layering of corporate bureaucracy which,
as seen with Halliburton's work in Iraq, makes it difficult to keep track
of actual costs. A Halliburton procurement manager told a congressional committee that the company's motto is: "Don't worry about price, it's cost-plus."
One approach to addressing the problem without losing the readiness factor
provided by ID-IQ contracts would be to award the LOGCAP to more than one
contractor. Each of the companies would be listed on a "schedule" of
eligible contractors, and when the need came to procure their services,
the eligible contractors could be asked to quickly bid on a specific task
order, on a case-by-case basis. Contracting experts suggest this approach
would retain the advantages of the ID-IQ contracts without losing the
cost-cutting efficiencies that come when contractors have to compete for
the taxpayer's business.