Army to End Exclusive Halliburton Deal


Richard Moore

another sign of anti-neocon counter-revolution?

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Army to End Expansive, Exclusive Halliburton Deal
Logistics Contract to Be Open for Bidding
By Griff Witte
Washington Post Staff Writer
Wednesday, July 12, 2006; A01

The Army is discontinuing a controversial multibillion-dollar deal with oil 
services giant Halliburton Co. to provide logistical support to U.S. troops 
worldwide, a decision that could cut deeply into the firm's dominance of 
government contracting in Iraq.

The choice comes after several years of attacks from critics who saw the 
contract as a symbol of politically connected corporations profiteering on the 

Under the deal, Halliburton had exclusive rights to provide the military with a 
wide range of work that included keeping soldiers around the world fed, 
sheltered and in communication with friends and family back home. Government 
audits turned up more than $1 billion in questionable costs. Whistle-blowers 
told how the company charged $45 per case of soda, double-billed on meals and 
allowed troops to bathe in contaminated water.

Halliburton officials have denied the allegations strenuously. Army officials 
yesterday defended the company's performance but also acknowledged that reliance
on a single contractor left the government vulnerable. The Pentagon's new plan 
will split the work among three companies, to be chosen this fall, with a fourth
firm hired to help monitor the performance of the other three. Halliburton will 
be eligible to bid on the work.

The decision on Halliburton comes as the U.S. contribution to Iraq's 
reconstruction begins to wane, reducing opportunities for U.S. companies after 
nearly four years of massive payouts to the private sector.

Of the more than $18 billion Congress allocated for reconstruction in late 2003,
more than two-thirds has been spent and more than 90 percent has been 
contractually obligated, according to the inspector general's office overseeing 
reconstruction work. The rest of the money, which is collectively known as the 
Iraq Relief and Reconstruction Fund, needs to be obligated by the end of 

Army spokesman Dave Foster said in a written response to questions that funding 
for 11 contracts covering various aspects of reconstruction -- including 
transportation, communications, water distribution and the electric grid -- will
expire this fall. While the contractors will be allowed to finish any work 
previously requested, no new work can be ordered after September.

Among those contracts is another Halliburton deal, for up to $1.2 billion to 
restore oil services in southern Iraq. As with the others, it will not be 

"The Iraq reconstruction is winding down . . . so there is no need for new 
contracts to replace the existing," Foster said.

Instead, the Iraqi government will have to find its own contractors to do the 
work, which includes tackling a large number of projects left undone by the 
United States.

"This is the year of transition for Iraqi reconstruction. The U.S.-funded 
projects are being completed and transferred to Iraqi management and control," 
said James Mitchell, spokesman for the inspector general's office.

That office has repeatedly warned of a "reconstruction gap" between what the 
United States promised in rebuilding the country after the spring 2003 invasion 
and what it has delivered. For instance, a contract aimed at building 142 new 
health centers across Iraq instead produced 20 before the program ran out of 

The heavy involvement of U.S. contractors in Iraq has been one of the defining 
features of the American presence there, with private companies called on for 
duties as varied as guarding supply convoys and analyzing intelligence.

No contractor has received more money as a result of the invasion of Iraq than 
Halliburton, whose former chief executive is Vice President Cheney.

The logistics work is performed through a subsidiary, Kellogg Brown & Root 
Services Inc. Last year, the Army paid the company more than $7 billion under 
the contract, according to a search of government contracting data by Eagle Eye 
Inc., a private consulting firm. The number this year is expected to be between 
$4 billion and $5 billion, according to Randy King, a program manager with the 

The company maintains that its billing disputes with Defense Department auditors
have been resolved and that its work has received rave reviews from the 
military. "By all accounts, KBR's logistical achievements in support of the 
troops in Iraq, Kuwait and Afghanistan have been nothing short of amazing," said
company spokeswoman Melissa Norcross in a statement.

King, the Army official, agreed yesterday. "Halliburton has done an outstanding 
job, under the circumstances," he said. He added that Pentagon leaders 
ultimately decided they did not want to have "all our eggs in one basket" 
because multiple contractors will give them better prices, more accountability 
and greater protection if one contractor fails to perform.

Halliburton initially won the contract in December 2001. At the time, the deal 
was relatively modest in size, but stubborn insurgencies in both Iraq and 
Afghanistan have stretched U.S. troops and kept Halliburton busy trying to meet 
their needs.

Known formally as the Logistics Civil Augmentation Program, or LOGCAP, the 
contract "has expanded beyond what anyone could have imagined," said Dov S. 
Zakheim, the Pentagon's comptroller from 2001 until 2004 and now a vice 
president at consulting firm Booz Allen Hamilton Inc. "The KBR people themselves
would point out that the challenges they had coming out of Iraq, over and above 
everything else they had to do, were taxing their systems. You're really asking 
too much of one firm to be able to manage all of this."

The original contract included one base year with nine option years. The Army 
says it will not pick up the next option year and instead plans to put out a new
request for proposal by the end of the month. It expects to announce winners in 

The bidding on the new contract is likely to attract some high-profile suitors, 
including weapons makers Lockheed Martin Corp. and Northrop Grumman Corp.

"These are huge contracts. They are among the biggest government services 
contracts that have ever been created," said Loren Thompson, chief operating 
officer of the Lexington Institute, a defense research organization in 
Arlington. "Most of the big, integrated defense contractors recognize that new 
sales of military hardware are going to be hard to come by in the years ahead. 
There's a general migration to services. And no contract on the horizon is 
bigger in services than LOGCAP. It's just too big to ignore."

Rep. Henry A. Waxman (D-Calif.), a frequent Halliburton critic, said he would 
like to see even more companies included as winners in order to increase 
competition as work arises. But he welcomed the move away from the exclusive 
contract with Halliburton as a good first step. "When you have a single 
contractor, that company has the government over a barrel," Waxman said. "One 
needs multiple contractors in order to have real price competition. Real 
competition saves the taxpayer money."

© 2006 The Washington Post Company

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