Auditors find another $108 million in Halliburton overcharges
14 March 2005
WASHINGTON, March 14 (HalliburtonWatch.org) -- Pentagon auditors found another $108 million in overcharges by Halliburton's KBR subsidiary, a congressman disclosed today. The overcharges took place under KBR's multibillion dollar oil infrastructure contract with the U.S. Army Corp of Engineers. According to the audit, the company overcharged the military for importing gasoline into Iraq. ###
In 2003, Pentagon auditors found an additional $61 million in overcharges by KBR in relation to importing fuel into Iraq. Investigators say KBR charged the Pentagon $2.64 per gallon of gasoline while competitors were importing gasoline for less than half that price. The Pentagon later fired KBR from this particular task order and assigned it to an office within the Pentagon known as the Defense Energy Support Center (DESC). The result was a 50 percent reduction in gasoline prices charged to U.S. taxpayers. Critics say this is another example proving privatization of the military has failed.
The Bush administration refuses to publicly release nine audit reports detailing Halliburton's abuse of taxpayer money in the Middle East. Rep. Henry Waxman, D-CA, and Rep. Christopher Shays, R-CT, have called on President Bush on a number of occasions to release the reports, which have heretofore been released only in redacted form. In a letter to President Bush, Waxman said: "Notwithstanding 12 separate followup requests from congressional staff, the Defense Department refused to turn over unredacted copies of the audits."
The audit released today was unredacted and provides details of KBR's overcharges for Task Order 5, which was issued by the Army under KBR's Restore Iraqi Oil (RIO) infrastructure contract. Task Order 5 is one of five orders issued to the company for importing fuel into Iraq. Under Task Order 5, KBR charged the Army $875 million to import fuel into Iraq, of which $108.4 million was not legal, auditors say.
So far, Halliburton has received $2.5 billion under RIO, which was originally awarded to the company without competition in the weeks prior to the March 2003 U.S.-led invasion of Iraq.
The audit says KBR overcharged on Task Order 5 for labor, material, subcontracts, overhead, and general and administrative expenses. It said the overcharges were "significant" and concluded that KBR failed to charge "a fair and reasonable price."
The RIO contract is a "cost-plus" contract, meaning the military pays the company for all costs, then pays a fee of 1 to 7 percent of those costs. The higher KBR's costs, the higher its fee from the military will be. Critics say this arrangement means Halliburton has an incentive to ensure its costs stay high.
Letter from Rep. Waxman to President Bush (pdf)
Pentagon audit of Task Order 5 (pdf)
Pentagon audit of Task Order 5, executive summary (pdf)
Houston Chronicle: Shipping was extra — a lot extra: KBR spent millions getting $82,100 worth of LPG into Iraq