WASHINGTON, Sept. 10 (HalliburtonWatch.org) -- Halliburton said it received a letter from the Pentagon praising the company's KBR subsidiary for its "effective and efficient" purchasing system used for managing military contracts. News of the letter was publicly released by Halliburton yesterday, two days after the Pentagon said it wants to terminate KBR's most lucrative contract in the Middle East and one month after military auditors found 43 percent of KBR's expenses could not be justified.

The letter, written by an official with the Pentagon's Defense Contract Management Agency (DCMA), is the first good news for Halliburton in months. The DCMA had approved KBR's purchasing system in June of last year, but initiated a second review last April. The agency has authority to make final judgments about the adequacy of KBR's business systems, which it described in the letter as "adequate" for the "protection of the Government's interest." It also said the company's purchasing system should not "be construed to be a determination of the acceptability of any subcontract price or of any amount paid under any subcontract."

The DCMA's conclusions give KBR wider latitude to award subcontracts without prior approval of a contracting officer, the Washington Post reported. But it does not address numerous pending investigations. For example, the Pentagon is still reviewing whether to withhold 15 percent of future payments to KBR because of $1.8 billion in suspicious expenses. The $1.8 billion represents 43 percent of KBR's total expenses incurred for supporting the troops in the Middle East under the Army's LOGCAP contract. In addition, the DCMA's letter does not address the ongoing investigations of alleged gasoline and food overcharges and bribery.

"While expected, this is clearly good news," said Andy Lane, president and chief executive officer for KBR. "Despite the constantly changing requirements of our customer and the challenges associated with operating in such a hostile environment, KBR continues to comply with the Government-mandated Federal Acquisition Regulation in all of our procurement actions, and we constantly seek out and implement improvements to our systems," he said.

More Information:

Pentagon says 43% of Halliburton's Iraq expenses are not verifiable

U.S. military may cancel Halliburton's Iraq logistics contract

Houston Chronicle: KBR gets pat on back

Washington Post: Halliburton Unit Gets a Positive Review From Pentagon

Associated Press: Agency OK Halliburton purchasing systems