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Democrats: Army pays bonus to Halliburton despite overcharges
20 April 2006

WASHINGTON, April 20 (HalliburtonWatch.org) -- Democratic senators criticized the Army Corps of Engineers for paying Halliburton over $250 million in costs in Iraq, plus profits and bonuses, despite conclusions by the Pentagon's own auditors that those costs were unreasonably high, unsupported or unjustified.

In a letter to Secretary of Defense Donald Rumsfeld, nine leading Senate Democrats, including John Kerry (MA), Dick Durbin (IL) and Barbara Boxer (CA), said the payment to Halliburton "does not inspire confidence" in maintaining "the highest standards of fiscal responsibility, integrity, and accountability."

The payment was made under Halliburton's $2.4 billion cost-plus "Restore Iraqi Oil" (RIO) contract, awarded to the company without competition in 2003. Under RIO, Halliburton's KBR subsidiary assumed responsibility for importing fuel into Iraq, restoring oil facilities, and assessing and suppressing oil spills and fires.

The Pentagon's Defense Contract Audit Agency (DCAA) recommended that the Army Corps of Engineers refuse payment to KBR of $263 million in costs the company incurred under RIO, but the Corps ultimately withheld only $10.1 million. In other words, the Corps refused only 3.8 percent of the amount challenged by the DCAA auditors. In contrast, 66 percent of costs disputed by the DCAA have typically been withheld from contractors over the last three years.

"We would like to know how and why the Corps arrived at a conclusion so different from that of your Department's own auditors," the senators asked Rumsfeld in their letter, adding: "We look forward to the results of your inquiry into this matter and hope that it will bring about a responsible solution that upholds the interests of America's taxpayers." But Rumsfeld has given no indication that he intends to conduct an inquiry.

"We strongly believe that the Department of Defense should bar from future contracts companies that have abused cost-plus arrangements in the past," the letter states, but notably failed to call for the suspension or debarment of Halliburton.

The Pentagon reimbursed Halliburton for all costs incurred under RIO, then paid a profit to the company of two percent, plus a bonus of five percent, of the cost.

Halliburton abandoned the RIO contract in 2005, one-year earlier than the planned completion date, because of the constant barrage of insurgent attacks and the State Department's heated criticism of the company's horrible performance in restoring Iraq's oil industry.