Halliburton bills U.S. taxpayers $50 for $5 labor in Iraq
6 Feb., 2006
WASHINGTON, Feb. 6 (HalliburtonWatch.org) -- Halliburton's KBR subsidiary pays $5 to $16 a day in wages to third world laborers in Iraq, but bills U.S. taxpayers between $50 and $80 a day for each laborer, military requisitions obtained by HalliburtonWatch reveal. ###
The requisitions contain KBR's per diem labor costs submitted to the military for approval.
“We pay our locals [in Iraq] $5 to $16 dollars a day and you can see where [KBR] put it down [on the military requisition] as $60 a day,” a KBR employee who wished to remain anonymous because of concern about company retaliation, remarked to HalliburtonWatch.
For example, an invoice from KBR subcontractor, Ranj Company, shows "washer folders" (laundry workers) are paid $7 a day, but the requisition shows the military is billed between $60 and $70 a day for this work, a roughly ten-fold markup for KBR. Security guards are paid $16 a day even though the military reimburses KBR at a daily rate of $60 for this work.
Company spokesperson, Melissa Norcross, did not dispute the authenticity of the documents obtained by HalliburtonWatch, but explained that the overall labor cost billed to the military includes more than simply the wages paid. “The amount KBR pays its subcontractors is not based on what each individual worker earns,” Norcross said. “The total amount paid to the subcontractor [and billed to the U.S. military] includes labor, overhead, material, equipment and other direct costs that go into the total cost of the work performance. It is this amount that KBR then bills to the government after each invoice is reviewed, verified and audited.”
Also included in the "labor cost" is the profit paid by KBR to subcontractors who hire and pay the workers. But it's impossible to determine how much of the labor cost is allocated for profit and how much is for overhead, material and equipment since this pricing information is not made public.
Billing the military up to $80 for $5 to $16 labor seems excessive since reports from Iraq indicate Halliburton is spending meager amounts on overhead and material for third world laborers. For example, South Korean workers complained to the Washington Post about not receiving flak jackets and helmets, even though U.S. workers had received them. Filipino workers reported they were often provided spoiled left-over food originally given to Americans. Indian workers told the Post about being transported into Iraq on buses with only gauze curtains to hide them from insurgents while American contractors came into the country on planes or in convoys with military escorts. Many foreign workers are forced to sleep in tents in 100 degree heat while Americans sleep in air-conditioned trailers. Other foreign nationals said working for KBR was “hell.” Whistleblowers say the company often serves contaminated food and water on military bases.
KBR whistleblower and former army chaplain, Marie deYoung, who testified before Congress in 2004 about the company's overcharges, said Halliburton actually bills the military more than the dollar amounts listed on the labor requisitions provided to HalliburtonWatch. During her experience, “KBR requisitions that were submitted to military officers for approval rarely showed the true cost of material, services, or labor that Halliburton would bill to the government at a later time,” she said. “Halliburton’s overhead charges and the subcontractor’s middleman fees were hidden, that is, not reported to the government officers when requisitions were submitted [by KBR] for approval.” As a result, the dollar amounts listed on the requisitions were almost always approved by the military without scrutiny.
Moreover, in her experience with the company, deYoung said, “KBR procurement managers did not require subcontractors to demonstrate price reasonableness for labor, material, or any other part of the contract. That is to say, KBR managers did not require subcontractors to produce documentation showing what laborers were paid to evaluate labor invoices that were submitted for payment.”
DeYoung was employed by KBR in Kuwait as an assistant subcontract administrator until she went public and exposed the company's overcharges and contracting abuse. She said subcontractors often "double bill" for services because of KBR’s notoriously weak oversight. Double-billing KBR is easy since subcontractors are allowed to submit separate bills to the company for material, overhead and equipment, she said. But this all works in favor of KBR. As a subcontractor's labor cost increases, KBR's profit from the military increases as well. So, the company has no incentive to prevent overcharges or unreasonable costs ultimately billed to U.S. taxpayers.
Indeed, Halliburton admitted in a leaked 2004 company memo that its cost controls for government contracts are "antiquated" and "weak" and its procurement "disorganized" and marked by "weak internal controls." Critics say these flaws make it easier for subcontractors to double-bill KBR, which results in greater profits for Halliburton and higher costs for the military.
Halliburton's Norcross is quick to point out that investigators at the Pentagon's Defense Contract Audit Agency and the Defense Contract Management Agency have full access to KBR's subcontract files, making it difficult for subcontractors to overcharge KBR. But the auditing practices of both agencies are under investigation by the U.S. Special Inspector General for Iraq Reconstruction (SIGIR), casting suspicion on the entire auditing process of the military.
The Republican-controlled House Committee on Government Reform has held only three hearings into KBR's pricing practices, but only upon the insistence of ranking member Henry Waxman (D-CA).
The Senate has completely avoided the issue, which has proven embarrassing to Vice President Dick Cheney, who headed Halliburton from 1995 to 2000.
Cheney's office was criticized for coordinating the award to KBR of the first no-bid Iraqi oil infrastructure contract in the weeks prior to the March 2003 invasion. The top civilian contracting offical with the Army Corps of Engineers disclosed that the award of the contract to KBR was "the most blatant and improper contract abuse I have witnessed during the course of my professional career."
The labor requisitions and Ranj invoice:
Labor laundry requisition (Excel)
Labor MWR requisition (Excel)
Labor spread sheet (Excel)
Labor trades requisition (Excel)
Trade and labor monthly cost requisition (Excel)
Mechanic requisition (Excel)
Ranj invoice (pdf)