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U.S. military may cancel Halliburton's Iraq logistics contract
7 Sept. 2004

WASHINGTON, Sept. 7 (HalliburtonWatch.org) -- The U.S. military recommended the termination of Halliburton's Iraq logistics contract so that other firms can be hired to assist the soldiers, the Wall Street Journal reported today. The military, which has criticized Halliburton's KBR subsidiary for contracting problems and overcharges, called for splitting up the contract so that companies other than Halliburton are in control. The recommendation was made in a memorandum written last month.

KBR's logistics contract with the Army, known as "LOGCAP", is worth $13 billion. It requires KBR to feed the troops, do their laundry, transport supplies around Iraq and Kuwait, and construct military housing. But numerous investigations, indictments and whistleblower accusations of fraud, waste and corruption have plagued the company since the Iraq war began in March 2003.

U.S. Vice President Dick Cheney was CEO of Halliburton from 1995 to 2000.

The Pentagon's desire to terminate the contract is a major blow to a company that once praised itself in advertisements for "supporting our troops" during war time.

But the Journal reported that the Pentagon wasn't attempting to penalize Halliburton, so much as to find greater efficiencies by parceling the work out to a wider range of companies. A Halliburton spokesperson attempted to minimize the damage by saying the Pentagon's move was "expected" and had occurred in previous contracts. The Army's decision was "positive and will help to resolve outstanding issues," Halliburton told the Journal.

The Pentagon's recommendation was dated Aug. 25 and was written by the Army's chief of procurement policy, Tina Ballard. She called for the Army to "immediately begin the transition" of the LOGCAP contract from Halliburton to a number of other companies -- though Halliburton will be permitted to bid on the new contracts. The company indicated today that it may not submit any bids if the original LOGCAP contract is split into too many pieces. "I'm not sure we're going to rebid if it's hacked into too many pieces in Iraq," Halliburton's chief executive, David Lesar, said today. "If we do choose to rebid, we're going to jack the margins up significantly," said Lesar, whose comments were broadcast on the Internet and reported by Reuters.

According to the Journal, the Pentagon wants to break up the LOGCAP contract into six or more smaller contracts. The contracts would be ready for bidding by the end of the year.

If the Army's recommendation is adopted, it "could erase the company's already thin profit margin in Iraq," the Journal reported.

The Army is still considering whether to withhold 15 percent of the expenses owed to Halliburton under current contracts. Under procurement law, the Army has authority to withhold 15 percent of the payments owed to Halliburton if the company's expenses are inaccurate, dishonest or suspicious. The Pentagon has spent many months delaying a final action on this issue even though it has complained on numerous occasions about Halliburton's suspicious invoices.

The Pentagon's recommended termination of Halliburton's contract gives credence to claims that privatizing the military has failed. Privatization of military functions was accelerated by Dick Cheney in 1992 while he was secretary of defense. In one of the many rebukes of Cheney's privatization policy, the Pentagon recently fired Halliburton from an Iraqi gasoline importation contract and assigned it to an office within the Pentagon. The result was a 50 percent reduction in gasoline prices charged to the U.S. taxpayer. Moreover, Halliburton pays truck drivers $80,000 per year to haul supplies around Iraq, but soldiers once did that work for one-third of that salary, suggesting the cost to U.S. taxpayers has skyrocketed because of Cheney's 1992 privatization.

More Information:

Two reports explain how Halliburton took taxpayers for a ride in Iraq

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

Halliburton loses $18.6 million worth of government property in Iraq

Government widens criminal probe of Halliburton's gas overcharges

Army grants Halliburton more time to explain suspicious bills

Pentagon auditor "strongly encourages" Army withhold payments to Halliburton - Rep. Waxman (pdf file)