home click for info

Pentagon says 43% of Halliburton's Iraq expenses are not verifiable
11 Aug. 2004

WASHINGTON, Aug. 11 (HalliburtonWatch.org) -- Halliburton cannot justify why it billed the Pentagon for $1.8 billion of work in Iraq and Kuwait, the Wall Street Journal reported today, citing a new Pentagon report. Pentagon accountants said they are uncertain as to why Halliburton's KBR unit billed the Pentagon $1.8 billion for the expenses, which represent 43 percent of the $4.18 billion the company billed the Pentagon for logistics work in the Middle East, the Journal said. The Pentagon's audit report obtained by the Journal, dated Aug. 4, has not officially been released to the public. It found KBR's "internal control policies" are "inadequate for providing verifiable, supportable, and documented cost estimates that are acceptable for negotiating a fair and reasonable price." Pentagon officials told the Journal that no defense contractor has had its estimating system ruled "inadequate" in years.

The billings involve more than $900 million in payments by KBR for dozens of dining facilities in the Middle East where it is responsible for feeding the troops. KBR feeds the troops under its LOGCAP contract awarded by the U.S. Army and is reimbursed by the government for all expenses, then paid a fee of 2 or 3 percent of those expenses. As Halliburton's expenses in Iraq go higher, its fee paid by the Pentagon goes higher, too. Critics say the company artificially inflates expenses in order to obtain a higher fee. One former employee said the company's motto in government contracting is "Don't worry about price. It's cost-plus," referring to the fact that Halliburton is paid a higher fee if it can find a way to inflate its expenses paid by the Pentagon.

Pentagon auditors said more than a third of the dining expenses may be unjustified, the Journal reported.

Auditors also are examining $180 million in KBR expenses incurred for importing fuel from Kuwait to Iraq.

These new allegations are likely to increase pressure on the federal government to withhold hundreds of millions of dollars of payments to Halliburton, but the Journal said government officials believe differences can be resolved without the withholding of large payments. Halliburton has until Aug. 15 to justify its expenses to Army officials. If the company fails to provide a justification for the $1.8 billion in expenses, it could lead to the withholding of as much as $600 million of payments from the Pentagon.

More Information:

Pentagon auditors report

HalliburtonWatch: Halliburton overcharged for meals by $186 million

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

HalliburtonWatch: Gasoline Overcharges

HalliburtonWatch: Government widens criminal probe of Halliburton's gas overcharges