The U.S. Army, in what could be the final twist in a complicated and drawn-out controversy, is laying the groundwork to let Halliburton Co. keep several billion dollars it was paid for work in Iraq that Pentagon auditors say is questionable or unsupported by proper documentation.
The Army has acknowledged that the Houston-based company might never be able to account properly for some of its Iraq work, and has hired a consulting firm to estimate what Halliburton's services "should cost."
...some disgruntled Pentagon officials describe the effort to broker an outside settlement with KBR as unusual in a contract of this magnitude. The company has taken heavy criticism from inside the Defense Department and from Congress for its accounting practices in Iraq.
KBR so far has billed about $12 billion in Iraq; almost $3 billion of that remains in dispute. Pentagon records show that $650 million in Halliburton billings is deemed "questionable," a term government auditors use when they see strong evidence of overcharges or contracting irregularities. Another $2 billion is considered "unsupported," meaning that KBR remains unable to provide sufficient paperwork.
Some Defense officials claim that despite a series of similar alerts running into this summer, Mr. Rumsfeld and his deputies applied little pressure on the Army to force KBR to clean up its act. Instead, they say, the problems continued to mount into 2004 as massive bills piled up that lacked sufficient documentation or were branded as questionable by Pentagon auditors.
To lead the effort to reach a settlement, the Army early this month hired Virginia-based Resource Consulting Inc., which does a wide range of government contract work, mainly for the military, and is heavily staffed with retired military officials. The Army also has assembled a "Special Cost Analysis Team," made up of Army contracting and financial officials, to work alongside the consultants.
Bills still under scrutiny include charges for services rendered as far back as the spring of 2003. Auditors have concluded that of nearly $900 million in outstanding bills for fuel and transportation costs from Kuwait to Iraq, about $250 million is regarded as "questionable."
The biggest area of dispute surrounds the way that KBR and its subcontractors billed for millions of meals, totaling more than $900 million, served to U.S. and coalition troops last year. Auditors have completed reviews for billing at about a quarter of the dining facilities in Iraq and Kuwait and have reported to the Army that KBR overcharged by an average of around 40%. Questionable charges could approach nearly $400 million after a final review of the remaining dining facilities, Defense officials say.
This story and the mammoth deceits behind it dovetail nicely with the Iraq "reparations" slush fund, from which Halliburton will be paid by the UN for "lost corporate assets and profits" from the first Gulf War.