Company Overcharged U.S. in Iraq, Bush Says
President Wants Halliburton Unit to Pay
By Dana Milbank and Jackie Spinner
Washington Post Staff Writers
Saturday, December 13, 2003; Page A19
President Bush said yesterday that he believes Halliburton Inc. overcharged the Pentagon in Iraq and that the company once led by Vice President Cheney should repay any such overcharge.
Democrats said the preliminary findings by a Pentagon audit -- that Halliburton may have overcharged the Army by $61 million for gasoline -- proved that the Bush administration was giving favorable treatment to its friends and supporters. But Bush said the findings, released Thursday, demonstrated the government was closely monitoring its contracts.
"I appreciate the Pentagon looking out after the taxpayers' money," Bush said after promoting Alphonso R. Jackson to be his new Housing and Urban Development secretary. "And if there's an overcharge, like we think there is, we expect that money to be repaid."
The audit found Halliburton, of which Cheney was chief executive before becoming Bush's running mate, may have overcharged the Army by $1.09 per gallon on nearly 57 million gallons of gasoline delivered to citizens in Iraq by buying from Kuwait instead of Turkey. The charges were part of a no-bid contract Halliburton received for rebuilding the Iraqi oil industry.
A Halliburton executive who declined to be identified said in an interview yesterday that the company's subsidiary, Kellogg, Brown & Root, picked the lowest eligible bidder. The executive said KBR was required by the Army Corps of Engineers to purchase some of the higher-priced Kuwaiti fuel and was only permitted to do business in Kuwait with companies approved by the government-owned Kuwait National Petroleum Co.
Halliburton has until Wednesday to respond to the Pentagon's draft audit report. The audit agency then will release a final report to the Army Corps, which would decide whether to seek reimbursement. "Until the contracting officer makes a decision, there is no dispute with the government," the executive said.
Democratic presidential candidates yesterday accused Bush of cronyism. Sen. Joseph I. Lieberman (Conn.) said the deal was lining "the pockets of well-connected corporations," while Sen. John Edwards (N.C.) charged that Halliburton was "war profiteering."
And former Vermont governor Howard Dean sought to link the Halliburton issue with a decision by the administration to block France, Germany and others who opposed the Iraq invasion from winning U.S.-funded contracts there. "George W. Bush is preventing entire nations from bidding on contracts in Iraq so his campaign contributors can continue to overcharge the American taxpayers," he said.
Democrats also continued to raise questions about the administration's move to block war opponents from getting prime contracts in Iraq. Sen. Joseph R. Biden Jr. (Del.), the ranking Democrat on the Foreign Relations Committee, said national security adviser Condoleezza Rice called him in April to express Bush's opposition to a slightly more stringent Senate proposal, saying "it limits his flexibility."
"The bottom line is they were opposed to it for every reason; they knew it was stupid," Biden said.
But the administration's new policy got an endorsement from Australian Foreign Minister Alexander Downer. "Those countries that have refused to pay any money to help with the support of reconstruction are demanding access to the contracts," Downer said in a radio interview. He said the new policy "should benefit Australia."
And after Senate Majority Leader Bill Frist (R-Tenn.) on Thursday raised concerns about the policy, House Majority Leader Tom DeLay (R-Tex.) yesterday defended the policy by issuing a statement titled "DeLay to Euro-Grumblers: 'Non' 'Nein,' and 'Nyet.' "
On the Halliburton matter, the preliminary findings the Defense Department made public Thursday were part of a routine audit of two contracts that KBR has with the government, including an Iraq oil reconstruction contract awarded in March worth as much as $7 billion. The results do not suggest that KBR necessarily did anything wrong, a defense official noted in laying out the findings.
The Halliburton executive said the company reviewed bids from four potential subcontractors. The winning company, Altanmia Commercial Marketing Co., was the low bidder that met all of the Army Corps' requirements, the executive said. The Halliburton executive said the Corps required the company to buy oil from Kuwait. "The Corps knew it," the executive said. "They told us to do it."
Some Democratic members of Congress have questioned why KBR bought more expensive fuel from Kuwait when it paid less for fuel from Turkey. According to government documents, KBR paid $1.17 per gallon to buy fuel from Kuwait and 89 cents to purchase it from Turkey.
But a spokesman for the Army Corps of Engineers said the agency told KBR that it could not just import fuel from a single source because "there was a great risk that any supply course was likely to be disrupted at some point." He added that Turkey did not have the capacity to supply all of the fuel and that an Army Corps audit of the oil contract found nothing inappropriate.
Speaking at a news conference yesterday, Defense Secretary Donald H. Rumsfeld said the government had not yet paid the money in question to the Halliburton unit. "We've got auditors that crawl all over these things," he said.
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