The War on Terrorism's Gravy Train
Cheney's Former Company Wins
Afghanistan War Contracts
By Pratap Chatterjee
Special to CorpWatch
May 2, 2002
Queenstown,
Vogaria, West Africa
-- On July 16, 2000,
United States Army
scrambled to deploy
troops at the request
of the embattled
Vogarian government
in a top secret
mission code named
Operation Restore
Order.
Political and
economic instability,
factional fighting
outside the capital of
Queenstown created
large numbers of
displaced civilians.
Large-scale famine
and disease were
feared. In five days
the U.S. Army
teamed up with a private company in Texas
to deploy and assemble a military camp
out of a pre-fabricated kit known as Force
Provider to assist the Vogarians.
Vogaria, of course, is a fictional country but
the military exercise -- which took place at
Fort McPherson, Georgia and the Diamond
Reserve Center in Louisiana -- could not be
more real. The Logistics Civil Augmentation
Program's War Fighter Exercise 2000 was
the first ever Department of Defense
simulation of civilian contractors assisting
the army in rapid response assembly of
military bases in a war situation.
The U.S. military has always relied on
private contractors to provide some basic
services such as construction, dating back
as far as the Civil War. But today as much
as 10% of the emergency U.S. army
operations overseas are contracted out to
private companies run by former
government and military officials. These
private companies operate with no public
oversight despite the fact that these
contractors work just behind the battle
lines. The companies are allowed to make
up to nine percent in profit out of these war
support efforts. And experience so far has
shown that the companies are not above
skimming more profits off the top if they
can.
Kellogg, Brown & Root Joins the
War on Terrorism
Employees of Kellogg, Brown & Root, a
subsidiary of Vice President Dick Cheney's
former company, Halliburton Corporation of
Dallas, Texas, are set to arrive at the
Bagram airbase in southern Afghanistan in
late April or early May 2002 (the exact date
is classified) to take over the support
services a Force Provider camp. They are
also scheduled to arrive at the Khanabad
airbase in Uzbekistan, one of the main
military support stations for the war in
Afghanistan, to run three Air Force Harvest
Eagle camps (an earlier version of Force
Provider) for the 1,500 U.S troops based
there since October, according to Daniel
McGinty, a spokesman at the Defense
Contract Management Agency.
Kellogg, Brown & Root will take charge of
support services including base camp
maintenance, laundry services, food
services, airfield services, and supply
operations, among others. Gale L. Smith, a
spokesperson for the U.S. Army
Operations Support Command in
Alexandria, Virginia refuses to confirm or
deny whether Kellogg, Brown & Root would
be working on similar bases in Manas,
Kyrgyzstan or other sites in Afghanistan
and Pakistan to support Operation
Enduring Freedom. The new job is one of
the first examples of a lucrative, new
ten-year contract that Kellogg, Brown &
Root won from the Pentagon on December
14, 2001 titled Logistics Civil Augmentation
Program (LOGCAP). The contract is what
the Pentagon calls a "cost-plus-award-fee,
indefinite-delivery/indefinite-quantity
service," which basically means that the
federal government has an open-ended
mandate and budget to send Kellogg,
Brown & Root anywhere in the world to run
humanitarian or military operations for
profit.
The Revolving Door
Halliburton, Kellogg, Brown & Root's parent
company, is a Fortune 500 construction
corporation working primarily for the oil
industry. In the early 1990s the company
was awarded the job to study and then
implement privatization of routine army
functions under Dick Cheney, then
secretary of defense.
When Cheney quit his job at the Pentagon,
he landed the job as chief executive of
Halliburton, bringing with him, his trusted
deputy David Gribbin. The two substantially
increased Halliburton's government
business until they quit in 2000 when
Cheney was elected vice-president, taking
multi-million dollar golden parachutes with
them. Since then, another former military
office and Cheney confidante, Admiral Joe
Lopez, former commander in chief for U.S.
forces in southern Europe, took over
Gribbin's former job of go-between the
government and the company, according to
Kellogg, Brown & Root's own press
releases. Other close friends include
Richard Armitage, the assistant secretary
of state, who worked as a consultant to
Halliburton before taking up his present job.
Critics charge that this is a classic
example of the revolving door between
government and big business. Bill Hartung,
senior research fellow at the World Policy
Institute in New York, says: "Cheney gives
new meaning to the term revolving door. If
he does not get elected president next, I
have no doubt he will return to Halliburton
when he leaves the White House."
And Harvey Wasserman, author of The
Last Energy War, says the Kellogg, Brown
& Root contracts are a scandal. "The
Bush-Cheney team have turned the United
States into a family business. That's why
we haven't seen Cheney -- he's cutting
deals with his old buddies who gave him a
multi-million dollar golden handshake,"
says Wasserman. "Have they no grace, no
shame, no common sense? Why don't just
have Enron run America? Or have Zapata
Petroleum (George W. Bush's failed oil
exploration venture) build a pipeline across
Afghanistan?"
Jennifer Millerwise, a spokesperson for
Cheney's office, denies that there was any
contact help from the White House. "The
vice president did not discuss this with
anybody from Halliburton or any subsidiary
of Halliburton. Nor does he comment on
Halliburton's policies since he doesn't work
there any more," she said.
The Business of War
Last year Kellogg, Brown & Root took in
$13 billion in revenues, according to its
latest annual report. Currently Kellogg,
Brown & Root estimates it has $740 million
in existing United States government
contracts, approximately 37% of their
global business, most of which are in
addition to the LOGCAP deal.
For example, in mid-November 2001
Kellogg, Brown & Root was paid $2 million
to reinforce the United States embassy in
Tashkent, Uzbekistan, under contract with
the State department. More recently
Kellogg, Brown & Root was paid $16 million
to go to Guantanamo Bay, Cuba, in March
2002 to build a 408-person prison for
captured Taliban fighters under a contract
with the U.S. Navy, according to Pentagon
press releases.
That's by no means all -- Kellogg, Brown &
Root employees can be found back home
running support operations for the U.S.
Army in Fort Knox, Kentucky to the U.S.
Naval Base in El Centro, California.
And it is snapping up contracts with
American allies also -- in September 2001,
the company signed on to a $283 million
project for Russia's Defense Threat
Reduction Agency to eliminate liquid-fueled
ICBMs missiles and their silos. In
November 2001 Kellogg, Brown & Root won
a $100 million order from the Philippines to
convert the former ship repair facilities of
the U.S. Navy in Subic Bay into a modern
commercial port facility and in December it
won a $420 million contract from the British
Army to support a fleet of new mammoth
tank transporters, according to company
press releases.
Kellogg, Brown & Root is no stranger to the
business of war. From 1962 to 1972 the
Pentagon paid the company tens of
millions of dollars to go to South Vietnam,
where they built roads, landing strips,
harbors, and military bases from the
demilitarized zone to the Mekong delta.
The company was one of the main
contractors hired to construct the Diego
Garcia airbase in the Indian Ocean,
according to Pentagon military histories.
Running services at military camps is a
relatively new chore for Kellogg, Brown &
Root that began in 1992 when the
Pentagon, then under Cheney's direction,
paid the company $3.9 million to produce a
classified report detailing how private
companies (like itself) could help provide
logistics for American troops in potential
war zones around the world. (see related
article) Later in 1992, the Pentagon gave
the company an additional $5 million to
update its report.
That same year, Kellogg, Brown & Root
won its first five-year logistical support
contract from the U.S. Army Corps of
Engineers that would send them into work
alongside G.I.s in places like Somalia,
Haiti, Kosovo, Bosnia, and Saudi Arabia.
The Balkan contract has been the most
profitable for Kellogg, Brown & Root -- the
General Accounting Office (GAO)
estimates that the company made $2.2
billion in revenue during the U.S. military
operations there building sewage systems,
kitchens, and showers and even washing
underwear for the 20,000 U.S. soldiers
stationed there.
Kudos from the Army, Criticism
from Outside
Army staff and their supporters have
nothing but praise for Kellogg, Brown &
Root. The Logistics Management Institute,
a military think-tank, claims that LOGCAP
contractors employed 24 percent fewer
personnel and were 28 percent less
expensive.
But other government agencies are more
skeptical. "It is convenient to contract a lot
of this work out. The problem is that the
government doesn't do the best job of
oversight," says Neil Curtin, director of
operations and readiness issues at the
defense capabilities and management team
at the GAO.
Policy analysts say that it is simply a
matter of time before something goes
wrong. "Suppose a local Afghani contractor
gets kidnapped or used for mischief? This
has not been thought through at the policy
level or opened up for public debate," notes
Thomas Donnelly, deputy executive director
of the Project for the New American
Century in Washington DC.
In fact some of the cost cutting is managed
by hiring local workers at lower wages than
U.S. soldiers would be paid, a controversial
practice that has its drawbacks. In 1994
United Nations troops armed with batons
and tear gas had to be brought in to quell
protests by workers that Kellogg, Brown &
Root dismissed at the end of its
engagement in Somalia. In Saudi Arabia,
the army was alarmed when it discovered
that locally contracted drivers were firing up
portable propane tanks to cook meals out
in the desert while transporting high
explosive ordinance weapons, according to
a student report published by the Air
University at Maxwell Air Force base in
Alabama.
Independent agencies are still skeptical.
For example a February 1997 study by the
GAO showed that an operation that was
estimated at $191.6 million when presented
to Congress in 1996 had ballooned to $461
and a half million a year later. Examples of
overspending included flying in plywood
from the United States at a cost of $85.98
per sheet (the cost in the United states
was $14.06) and billing the Army to pay its
employees income taxes in Hungary.
A subsequent GAO report, issued in
September 2000, noted that army
commanders in the Balkans were unable to
keep track of contracts as they were
typically rotated out after six months,
erasing institutional memory. For example
the GAO pointed out that many of the
Kellogg, Brown & Root contract employees
were idle most of the time despite the fact
that offices were being cleaned four times a
day. The GAO also faulted Kellogg, Brown
& Root in its over-zealous purchase of
power generators at great expense and
employing far more firefighters than
necessary.
Allegations of Fraud
In February this year Kellogg, Brown &
Root paid out $2 million to settle a lawsuit
with the Justice Department, which alleged
that the company defrauded the
government during the closure of the Fort
Ord military base in Monterey, California in
the mid-1990s.
The allegations in the case first surfaced
several years ago when Dammen Gant
Campbell, a former contracts manager for
Kellogg, Brown & Root, turned
whistle-blower and charged that between
1994 and 1998 the company fraudulently
inflated project costs by misrepresenting
the quantities, quality and types of
materials required for 224 projects.
Campbell said that the company submitted
a detailed "contractors pricing proposal"
from an Army manual containing fixed
prices for some 30,000 line items.
Once the proposal was approved, the
company submitted a more general
"statement of work" which did not contain a
detailed breakdown of items to be
purchased. Then, according to Campbell,
Kellogg, Brown & Root intentionally did not
deliver many items listed in the original
proposal. The company defends this
practice by claiming that the "statement of
work" was the legally binding document,
not the original "contractors pricing
proposal."
"Whether you characterize it as fraud or
sharp business practices, the bottom line
is the same, the government was not
getting what it paid for, " explained Michael
Hirst, who litigated the case for United
States Attorney's office in Sacramento.
"We alleged that they exploited the
contracting process and increased their
profits at the government's expense," Hirst
added.
Meanwhile, Campbell's attorney, Dan
Schrader, was pleased with the settlement
but he wondered why the company was so
eager to compromise. "If the company was
indicted, I suspect that it might have been
far more difficult for them to get new
government contracts," he said.
Indeed the recently issued 2001 annual
report says precisely that, in its notes on
the settlement of the lawsuit: "Kellogg,
Brown & Root's ability to perform further
work for the U.S. government has not been
impaired." Adds Hirst: "Kellogg, Brown &
Root was very cooperative and eager to
settle. They said they wanted to maintain a
good relationship with the government."
Kellogg, Brown & Root will have a harder
time milking the contract in Afghanistan
because the government is now dispatching
auditors from the Defense Contract
Management Agency to monitor all
purchases but it still stands to make at
least a profit on whatever it can bill. The
contract allows for the company to charge
up to a 9% mark up on supplies.
And if the "war on terrorism" expands to the
size of the Balkan operations that could
add up to a few hundred million dollars in
profits. In addition to the bases in
Uzbekistan and Afghanistan, the Army
recently started dispatching Force Provider
units to the Manas airbase in Kyrgzstan,
as recently as January 2002, to support up
to 3,500 soldiers. Whether or not Kellogg,
Brown & Root will follow them there, the
Army has yet to tell the public.
At the time of writing Kellogg, Brown &
Root kept its mouth shut about potential
work in Afghanistan or Uzbekistan.
"Kellogg, Brown & Root has not deployed
nor been tasked to provide support in either
country," said Zelma Branch, a
spokesperson for the company, refusing to
give any more details about the current
LOGCAP contract. When provided with
evidence that the company was indeed
going to both countries, she emailed this
response: "We can not elaborate at this
time. Recommend you contact the Army."
The Pentagon, on the other hand, is
considering considerably expanding the
role of the private sector to do a variety of
services from refueling fighter jets and
bombers in mid-air to running the missile
tracking systems.
Rumors are swirling that the Defense
Security Cooperation Agency (DSCA) is
considering hiring private contractors to
train the new Afghan police and army,
which it has done in the past in places like
Croatia where it hired a private company to
train the military.
David Des Roches, a DSCA spokesman,
denied that the Pentagon had a proposal on
the table at the moment but did not rule out
the future possibility. "A lot of people have
said, 'Ding ding ding, gravy train'. But in
point of fact, it makes sense. They're
probably better at doing these sorts of
missions than anyone else I could think of,"
he said.
Bill Hartung of the World Policy Institute
disagrees. "This is a company which has
more experience with insider dealing and
corruption than with efficiency, " he
explained. "During the Second World War,
there was a Senate committee on war
profiteering. Personally I think we should
set it up again and investigate Kellogg,
Brown & Root."
Pratap Chatterjee is a freelance journalist
based in Berkeley, California. In 1994-1995
he reported on the World Bank and the
International Monetary Fund for Inter Press
Service, a Third World News Service, in
Washington D.C.
The War on Terrorism's Gravy
Train
By Pratap Chatterjee
Star Wars
By Karl Grossman
Homeland Security,
Homeland Profits
From Issue: Internet Politics
Toxic Drift: Monsanto and the
Drug War in Colombia
By Jeremy Bigwood
>> More Articles
Updated: 07/02/2002
USA: Northrop to Purchase
TRW for $7.8 Billion
South America: Countries
Worry Plan Colombia Will
Spillover
Philippines: Preparations for
U.S. Military Base Sparks
Alarm
USA: Bush Faces Flak Over
Links to Defense Contractor
USA: Boeing's Sweet Deal
>> More News
Updated: 06/27/2002
Companies Break Law, Still
Win Big Government
Contracts
CorpWatch
PO Box 29344
San Francisco, CA 94129 USA
Tel: 415-561-6568 Fax: 415-561-6493
URL: corpwatch.org
Email: corpwatch@corpwatch.org
____________________________
bia |
